Friday, Jan. 4, 2019 2:30 PM - 4:30 PM
- Chair: Ali M. Kutan, Southern Illinois University-Edwardsville
Winners and Losers from Interest Rate Ceilings: Quasi-experimental Evidence from Chile
AbstractThis paper exploits a natural experiment in Chile, using the introduction a new anti-usury law that significantly reduced the maximum rate allowed for credit operations. We explore the impact that this regulatory change had on the market for consumption loans, credit cards, and credit lines and on banks. We use unique administrative records covering all credit operations generated by the universe of banks, credit applications, and accounting information. The evidence shows that, on impact, the regulatory changes led to a significant reduction in the interest rates charged to consumers, as the existing products were repriced. Most of the action come from a compression of the observed rates at the top of the distribution. While part of the consumers remained as bank customers with lower rates, others disappeared from the banking system. The main losers from the new law were riskier borrowers that became de-bancarized and banks that reduced their activity in lower income segments. The main winners were lower risk clients and existing clients for which banks had better information.
FinTech Credit and Service Quality
AbstractUsing millions of online merchants and a fuzzy discontinuity rule in FinTech credit allocation, the paper identifies a causal effect of credit access on the service quality of small businesses. We find that access to credit incentivizes firms to provide better services as measured by detailed seller ratings contributed by customers. Additional results show that the positive effect is significantly larger for firms in more competitive industries, and there is not substitution effect between bank credit and FinTech credit in funding service quality investment. We also find that access to credit helps firms recover from natural hazards and improves their resilience to operational shocks.
Specialization in Bank Lending: Evidence from Exporting Firms
AbstractWe develop an empirical approach for identifying specialization in bank lending using granular data on borrower activities. We illustrate the approach by characterizing bank specialization by export market, combining bank, loan, and export data for all firms in Peru. We find that all banks specialize in at least one export market, that specialization affects a firm’s choice of new lenders and how to finance exports, and that credit supply shocks disproportionately affect a firm’s exports to markets where the lender specializes in. Thus, bank market-specific specialization makes credit difficult to substitute, with consequences for competition in credit markets and the transmission of credit shocks to the economy.
- O1 - Economic Development
- F3 - International Finance