Consumer Credit: Evidence from Italian Micro Data

S. Hochguertel, R. Alessie, G. Weber

Research output: Contribution to JournalArticleAcademic

Abstract

In this paper we analyse unique data on credit applications received by the leading provider of consumer credit in Italy (Findomestic). The data set covers a five-year period (1995-1999) during which the consumer credit market rapidly expanded in Italy and a new law (the usury law) came into force that set a limit on interest rates charged to consumers. We compute behavioural changes by controlling for changes in the observable characteristics of the Findomestic clientele and argue that, under suitable identifying assumptions, these changes can be given a structural interpretation. If the usury shock is assumed to have affected credit supply but not credit demand-that is, if the usury law had a differential impact on the supply of various types of credit but a uniform impact on demand-then we can identify and estimate a demand equation. Our key finding is that demand is interest-rate elastic, particularly in the more affluent North. © 2005 by the European Economic Association.
Original languageEnglish
Pages (from-to)144-178
Number of pages35
JournalJournal of the European Economic Association
Volume3
DOIs
Publication statusPublished - 2005

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Consumer credit
Micro data
Usury
Credit
Interest rates
Italy
Credit markets
Clientele
Economics
Credit supply
Behavioural change

Cite this

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title = "Consumer Credit: Evidence from Italian Micro Data",
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Consumer Credit: Evidence from Italian Micro Data. / Hochguertel, S.; Alessie, R.; Weber, G.

In: Journal of the European Economic Association, Vol. 3, 2005, p. 144-178.

Research output: Contribution to JournalArticleAcademic

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AU - Alessie, R.

AU - Weber, G.

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AB - In this paper we analyse unique data on credit applications received by the leading provider of consumer credit in Italy (Findomestic). The data set covers a five-year period (1995-1999) during which the consumer credit market rapidly expanded in Italy and a new law (the usury law) came into force that set a limit on interest rates charged to consumers. We compute behavioural changes by controlling for changes in the observable characteristics of the Findomestic clientele and argue that, under suitable identifying assumptions, these changes can be given a structural interpretation. If the usury shock is assumed to have affected credit supply but not credit demand-that is, if the usury law had a differential impact on the supply of various types of credit but a uniform impact on demand-then we can identify and estimate a demand equation. Our key finding is that demand is interest-rate elastic, particularly in the more affluent North. © 2005 by the European Economic Association.

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