Repossession and the Democratization of Credit / Juliano J. Assunção, Efraim Benmelech, Fernando S. S. Silva.

Format:

Book

Author/Creator:

Assunção, Juliano J.

Contributor:

National Bureau of Economic Research.

Benmelech, Efraim.

Silva, Fernando S. S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w17858.

NBER working paper series no. w17858

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

We exploit a 2004 credit reform in Brazil that simplified the sale of repossessed cars used as collateral for auto loans. We show that the change has led to larger loans with lower spreads and longer maturities. The reform expanded credit to riskier, low-income borrowers for newer, more expensive cars. Although the credit reform improved riskier borrowers' access to credit, it also led to increased incidences of delinquency and default. Our results shed light on the consequences of a credit reform, highlighting the crucial role that collateral and repossession play in the liberalization and democratization of credit.

Notes:

Print version record

February 2012.