An Empirical Analysis of Personal Bankruptcy and Delinquency / David B. Gross, Nicholas S. Souleles.

Format:

Book

Author/Creator:

Gross, David B.

Contributor:

National Bureau of Economic Research.

Souleles, Nicholas S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8409.

NBER working paper series no. w8409

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

This paper uses a new panel data set of credit card accounts to analyze credit card delinquency, personal bankruptcy, and the stability of credit risk models. We estimate duration models for default and assess the relative importance of different variables in predicting default. We investigate how the propensity to default has changed over time, disentangling the two leading explanations for the recent increase in default rates - a deterioration in the risk - composition of borrowers versus an increase in borrowers' willingness to default due to declines in default costs, including social, information, and legal costs. Even after controlling for risk-composition and other economic fundamentals, the propensity to default significantly increased between 1995 and 1997. By contrast, increases in credit limits and other changes in risk-composition explain only a small part of the change in default rates. Standard default models appear to have missed an important time-varying default factor, consistent with a decline in default costs.

Notes:

Print version record

August 2001.