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American Economic Journal: Macroeconomics: Vol. 4 No. 3 (July 2012)

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A Quantitative Theory of Information and Unsecured Credit

Article Citation

Athreya, Kartik, Xuan S. Tam, and Eric R. Young. 2012. "A Quantitative Theory of Information and Unsecured Credit." American Economic Journal: Macroeconomics, 4(3): 153-83.

DOI: 10.1257/mac.4.3.153

Abstract

Important changes have occurred in unsecured credit markets over the past three decades. Most prominently, there have been large increases in aggregate consumer debt, the personal bankruptcy rate, the size of bankruptcies, the dispersion of interest rates paid by borrowers, and the relative discount received by those with good credit ratings. We find that improvements in information available to lenders on household-level costs of bankruptcy can account for a significant fraction of what has been observed. The ex ante welfare gains from better information are positive but small. (JEL D14, D82, G21)

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Authors

Athreya, Kartik (Federal Reserve Bank of Richmond)
Tam, Xuan S. (U Cambridge)
Young, Eric R. (U VA)

JEL Classifications

D14: Personal Finance
D82: Asymmetric and Private Information
G21: Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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American Economic Journal: Macroeconomics


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