Discussion Paper Details

Please find the details for DP7633 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Risk Heterogeneity and Credit Supply: Evidence from the Mortgage Market

Author(s): Timothy J. Besley, Neil Meads and Paolo Surico

Publication Date: January 2010

Keyword(s): credit supply, heterogeneous effects, instrumental variable., mortgage individual data and risk pricing

Programme Area(s): Financial Economics and International Macroeconomics

Abstract: This paper uses a unique data set on more than 600,000 mortgage contracts to estimate a credit supply function which allows for risk-heterogeneity. Non-linearity is modeled using quantile regressions. We propose an instrumental variable approach in which changes in the tax treatment of housing transactions are used as an instrument for loan demand. The results are suggestive of considerable risk heterogeneity with riskier borrowers penalized more for borrowing more.

For full details and related downloads, please visit:

Bibliographic Reference

Besley, T, Meads, N and Surico, P. 2010. 'Risk Heterogeneity and Credit Supply: Evidence from the Mortgage Market'. London, Centre for Economic Policy Research.