蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Liquidity Constraints and Imperfect Information in Subprime Lending
蝌蚪网 Review
vol. 99,
no. 1, March 2009
(pp. 49–84)
Abstract
We present new evidence on consumer liquidity constraints and the credit market conditions that might give rise to them. We analyze unique data from a large auto sales company serving the subprime market. Short-term liquidity appears to be a key driver of consumer behavior. Demand increases sharply during tax rebate season and purchases are highly sensitive to down-payment requirements. Lenders also face substantial informational problems. Default rates rise significantly with loan size, providing a rationale for loan caps, and higher-risk borrowers demand larger loans. This adverse selection is mitigated, however, by risk-based pricing. (JEL D14, D82, D83, G21)Citation
Adams, William, Liran Einav, and Jonathan Levin. 2009. "Liquidity Constraints and Imperfect Information in Subprime Lending." 蝌蚪网 Review 99 (1): 49–84. DOI: 10.1257/aer.99.1.49Additional Materials
JEL Classification
- D14 Personal Finance
- D82 Asymmetric and Private Information
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages