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Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market

Dell’Ariccia, G., Deniz Igan and Luc Laeven ()
Authors registered in the RePEc Author Service: Giovanni Dell'ariccia ()

No 2009-46 S, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: This paper links the current subprime mortgage crisis to a decline in lending standards associated with the rapid expansion and changes in the structure of this market. We show that lending standards declined more in areas that experienced faster credit growth. We also find that the entry of new lenders contributed to the decline in lending standards. The results are robust to controlling for house price appreciation, mortgage securitization, and other economic fundamentals, and to several robustness tests controlling for endogeneity. The results are consistent with the predictions of recent models based on asymmetric information, and shed light on the relationship between credit booms and financial instability.

Keywords: credit boom; lending standards; mortgages; subprime loans; moral hazard; financial accelerators (search for similar items in EconPapers)
JEL-codes: G21 E51 (search for similar items in EconPapers)
Date: 2009
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Related works:
Journal Article: Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market (2012) Downloads
Working Paper: Credit Booms and Lending Standards: Evidence From The Subprime Mortgage Market (2008) Downloads
Working Paper: Credit Booms and Lending Standards; Evidence From the Subprime Mortgage Market (2008) Downloads
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