Working Paper: CEPR ID: DP7633
Authors: Timothy J. Besley; Neil Meads; Paolo Surico
Abstract: This paper uses a unique data set on more than 600,000 mortgage contracts to estimate a credit supply function which allows for risk-heterogeneity. Non-linearity is modeled using quantile regressions. We propose an instrumental variable approach in which changes in the tax treatment of housing transactions are used as an instrument for loan demand. The results are suggestive of considerable risk heterogeneity with riskier borrowers penalized more for borrowing more.
Keywords: credit supply; heterogeneous effects; instrumental variable; mortgage; individual data; risk pricing
JEL Codes: D10; E21; G21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Loan Size (G51) | Interest Rates (E43) |