Friday, Jan. 4, 2019 10:15 AM - 12:15 PM
- Chair: Camelia M. Kuhnen, University of North Carolina-Chapel Hill
Expectations Uncertainty and Household Economic Behavior
AbstractWe show that there exists significant heterogeneity across US households in how uncertain they are in their expectations regarding personal and macroeconomic outcomes, and that uncertainty in expectations predicts households' choices. Individuals with lower income or education, more precarious finances, and living in counties with higher unemployment are more uncertain in their expectations regarding own-income growth, inflation, and national home price changes. People with more uncertain expectations, even accounting for their socioeconomic characteristics, exhibit more precaution in their consumption, credit, and investment behaviors.
The Effects of Competition: Evidence from Consumer Credit Markets
AbstractThis paper studies the effects of increased banking competition using changes in financial regulation that allowed some credit unions to compete directly with local banks. We find that both efficiency and leverage rose at local banks in response to increased competition, while consumer borrowing costs fell, and deposit rates rose. These results reflect in part selection, as competition drove out less efficient and less well-capitalized banks. We also show that increased competition led to a significant re-allocation of credit towards riskier borrowers, resulting in subsequently higher delinquency rates. Taken together, these findings show that while increased competition can relax credit constraints for previously marginalized borrowers, this reallocation in credit can also lead to higher future losses in the banking system.
The Economic Consequences of Bankruptcy Reform
AbstractWe examine the effects of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). We find significant bunching of bankruptcy filings just prior to the effective date of BAPCPA as consumers rushed to file before the new regulations were put in place. Cumulatively, BAPCPA led to a long-run decrease in the rate of bankruptcy filing and an increase in the ratio of Chapter 13 to Chapter 7 filings, but little change in the demographic or financial characteristics of filers. We also find that BAPCPA was associated with a significant decrease in the price of unsecured credit. Overall, while BAPCPA made it more difficult to declare bankruptcy, we find little evidence that it systematically curtailed strategic filings.
- G4 - Behavioral Finance
- G2 - Financial Institutions and Services