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A Simple Model of Subprime Borrowers and Credit Growth / Alejandro Justiniano, Giorgio E. Primiceri, Andrea Tambalotti.
- Format:
- Book
- Author/Creator:
- Justiniano, Alejandro.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w21942.
- NBER working paper series no. w21942
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- The surge in credit and house prices that preceded the Great Recession was particularly pronounced in ZIP codes with a higher fraction of subprime borrowers (Mian and Sufi, 2009). We present a simple model with prime and subprime borrowers distributed across geographic locations, which can reproduce this stylized fact as a result of an expansion in the supply of credit. Due to their low income, subprime households are constrained in their ability to meet interest payments and hence sustain debt. As a result, when the supply of credit increases and interest rates fall, they take on disproportionately more debt than their prime counterparts, who are not subject to that constraint.
- Notes:
- Print version record
- January 2016.
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