A Quantitative Theory of Unsecured Consumer Credit with Risk of Default
We study, theoretically and quantitatively, the general equilibrium of an economy in which households smooth consumption by means of both a riskless asset and unsecured loans with the option to default. The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Com...
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Veröffentlicht in: | Econometrica 2007-11, Vol.75 (6), p.1525-1589 |
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creator | Chatterjee, Satyajit Corbae, Dean Nakajima, Makoto Ríos-Rull, José-Víctor |
description | We study, theoretically and quantitatively, the general equilibrium of an economy in which households smooth consumption by means of both a riskless asset and unsecured loans with the option to default. The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Competitive financial intermediaries offer a menu of loan sizes and interest rates wherein each loan makes zero profits. We prove the existence of a steady-state equilibrium and characterize the circumstances under which a household defaults on its loans. We show that our model accounts for the main statistics regarding bankruptcy and unsecured credit while matching key macro-economic aggregates, and the earnings and wealth distributions. We use this model to address the implications of a recent policy change that introduces a form of "means testing" for households contemplating a Chapter 7 bankruptcy filing. We find that this policy change yields large welfare gains. |
doi_str_mv | 10.1111/j.1468-0262.2007.00806.x |
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The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Competitive financial intermediaries offer a menu of loan sizes and interest rates wherein each loan makes zero profits. We prove the existence of a steady-state equilibrium and characterize the circumstances under which a household defaults on its loans. We show that our model accounts for the main statistics regarding bankruptcy and unsecured credit while matching key macro-economic aggregates, and the earnings and wealth distributions. We use this model to address the implications of a recent policy change that introduces a form of "means testing" for households contemplating a Chapter 7 bankruptcy filing. 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Nov 2007</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c6036-6c06113461a9a37d1583527e5ae68d660af3bb754d37a83d2311c4c9dd7a002c3</citedby><cites>FETCH-LOGICAL-c6036-6c06113461a9a37d1583527e5ae68d660af3bb754d37a83d2311c4c9dd7a002c3</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://www.jstor.org/stable/pdf/4502043$$EPDF$$P50$$Gjstor$$H</linktopdf><linktohtml>$$Uhttps://www.jstor.org/stable/4502043$$EHTML$$P50$$Gjstor$$H</linktohtml><link.rule.ids>314,780,784,803,832,1417,27924,27925,45574,45575,58017,58021,58250,58254</link.rule.ids><backlink>$$Uhttp://pascal-francis.inist.fr/vibad/index.php?action=getRecordDetail&idt=19240329$$DView record in Pascal Francis$$Hfree_for_read</backlink></links><search><creatorcontrib>Chatterjee, Satyajit</creatorcontrib><creatorcontrib>Corbae, Dean</creatorcontrib><creatorcontrib>Nakajima, Makoto</creatorcontrib><creatorcontrib>Ríos-Rull, José-Víctor</creatorcontrib><title>A Quantitative Theory of Unsecured Consumer Credit with Risk of Default</title><title>Econometrica</title><description>We study, theoretically and quantitatively, the general equilibrium of an economy in which households smooth consumption by means of both a riskless asset and unsecured loans with the option to default. The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Competitive financial intermediaries offer a menu of loan sizes and interest rates wherein each loan makes zero profits. We prove the existence of a steady-state equilibrium and characterize the circumstances under which a household defaults on its loans. We show that our model accounts for the main statistics regarding bankruptcy and unsecured credit while matching key macro-economic aggregates, and the earnings and wealth distributions. We use this model to address the implications of a recent policy change that introduces a form of "means testing" for households contemplating a Chapter 7 bankruptcy filing. We find that this policy change yields large welfare gains.</description><subject>Applications</subject><subject>Bankruptcy</subject><subject>Consumer bankruptcy</subject><subject>Consumer credit</subject><subject>Consumption</subject><subject>Credit</subject><subject>Credit market</subject><subject>Default</subject><subject>Default risk</subject><subject>Distribution theory</subject><subject>Economic equilibrium models</subject><subject>Economic modeling</subject><subject>Economic models</subject><subject>Exact sciences and technology</subject><subject>Financial economics</subject><subject>Financial liabilities</subject><subject>Financial risks</subject><subject>General economic equilibrium</subject><subject>general equilibrium</subject><subject>Household income</subject><subject>Insurance, economics, finance</subject><subject>Loan defaults</subject><subject>Manual labor</subject><subject>Mathematics</subject><subject>Model testing</subject><subject>Personal bankruptcy</subject><subject>Personal debt</subject><subject>Probability and statistics</subject><subject>Probability theory and stochastic processes</subject><subject>Sciences and techniques of general use</subject><subject>Statistics</subject><subject>Studies</subject><subject>U.S.A</subject><issn>0012-9682</issn><issn>1468-0262</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2007</creationdate><recordtype>article</recordtype><recordid>eNqNkdFr1TAYxYMoeJ3-Bz4UQd9avyRtkj74cKlbFYZz7o75FrI0Zel625mk273_vakdV_BlhkASzu8cyPkQSjBkOK6PXYZzJlIgjGQEgGcAAli2e4ZWB-E5WgFgkpZMkJfolfcdABRxr1C9Ts4nNQQbVLD3JtncmNHtk7FNLgdv9ORMk1Tj4KetcUkVXzYkDzbcJD-sv52xz6ZVUx9eoxet6r1583geocuT4031JT09q79W69NUM6AsZRoYxjRnWJWK8gYXghaEm0IZJhrGQLX0-poXeUO5ErQhFGOd67JpuAIgmh6hD0vunRt_TcYHubVem75XgxknLynjAlOGnwRJLABTzCL47h-wGyc3xE9EhoqS4FJESCyQdqP3zrTyztmtcnuJQc5zkJ2c65Zz3XKeg_wzB7mL1veP-cpr1bdODdr6v_6S5EBJGblPC_dge7P_73x5XG3W8Rb9bxd_58PoDv68AAI5jXK6yNYHszvIyt1Kxikv5NW3WtZXFz_P64vvEuhvywGxIA</recordid><startdate>200711</startdate><enddate>200711</enddate><creator>Chatterjee, Satyajit</creator><creator>Corbae, Dean</creator><creator>Nakajima, Makoto</creator><creator>Ríos-Rull, José-Víctor</creator><general>Blackwell Publishing Ltd</general><general>Econometric Society</general><general>Blackwell</general><scope>BSCLL</scope><scope>IQODW</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope><scope>7U1</scope><scope>7U2</scope><scope>C1K</scope></search><sort><creationdate>200711</creationdate><title>A Quantitative Theory of Unsecured Consumer Credit with Risk of Default</title><author>Chatterjee, Satyajit ; 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The default option resembles a bankruptcy filing under Chapter 7 of the U.S. Bankruptcy Code. Competitive financial intermediaries offer a menu of loan sizes and interest rates wherein each loan makes zero profits. We prove the existence of a steady-state equilibrium and characterize the circumstances under which a household defaults on its loans. We show that our model accounts for the main statistics regarding bankruptcy and unsecured credit while matching key macro-economic aggregates, and the earnings and wealth distributions. We use this model to address the implications of a recent policy change that introduces a form of "means testing" for households contemplating a Chapter 7 bankruptcy filing. We find that this policy change yields large welfare gains.</abstract><cop>Oxford, UK</cop><pub>Blackwell Publishing Ltd</pub><doi>10.1111/j.1468-0262.2007.00806.x</doi><tpages>65</tpages><oa>free_for_read</oa></addata></record> |
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source | JSTOR Mathematics & Statistics; Access via Wiley Online Library; JSTOR |
subjects | Applications Bankruptcy Consumer bankruptcy Consumer credit Consumption Credit Credit market Default Default risk Distribution theory Economic equilibrium models Economic modeling Economic models Exact sciences and technology Financial economics Financial liabilities Financial risks General economic equilibrium general equilibrium Household income Insurance, economics, finance Loan defaults Manual labor Mathematics Model testing Personal bankruptcy Personal debt Probability and statistics Probability theory and stochastic processes Sciences and techniques of general use Statistics Studies U.S.A |
title | A Quantitative Theory of Unsecured Consumer Credit with Risk of Default |
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