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Journal Article
Bankers, regulators absorb lessons of Silicon Valley Bank failure as new tests emerge
Ben Munyan, director of supervisory policy in the Banking Supervision Department at the Federal Reserve Bank of Dallas, discusses the challenges the banking industry faces in an era of rapidly rising interest rates and how Texas institutions have fared.
Journal Article
Texas’ cheap housing edge slipping away as resilient demand outpaces supply
Housing affordability has declined in Texas, a top destination for domestic and international migrants drawn by its historically low cost of living.
Working Paper
Targeted business incentives and the debt behavior of households
The empirical effects of place-based tax incentive schemes designed to aid low-income communities are unclear. While a growing number of studies find beneficial effects on employment, there is little investigation into other behaviors of households affected by such programs. We analyze the impact of the Texas Enterprise Zone Program on household debt and delinquency. Specifically, we utilize detailed information on all household liabilities, delinquencies, and credit scores from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, a quarterly longitudinal 5% random sample of ...
Report
Determinants of mortgage default and consumer credit use: the effects of foreclosure laws and foreclosure delays
The mortgage default decision is part of a complex household credit management problem. We examine how factors affecting mortgage default spill over to other credit markets. As home equity turns negative, homeowners default on mortgages and HELOCs at higher rates, whereas they prioritize repaying credit cards and auto loans. Larger unused credit card limits intensify the preservation of credit cards over housing debt. Although mortgage non-recourse statutes increase default on all types of housing debt, they reduce credit card defaults. Foreclosure delays increase default rates for both ...
Working Paper
Loan guarantees for consumer credit markets
Loan guarantees are arguably the most widely used policy intervention in credit markets, especially for consumers. This may be natural, as they have several features that, a priori, suggest that they might be particularly effective in improving allocations. However, despite this, little is actually known about the size of their effects on prices, allocations, and welfare. ; In this paper, we provide a quantitative assessment of loan guarantees, in the context of unsecured consumption loans. Our work is novel as it studies loan guarantees in a rich dynamic model where credit allocation is ...
Report
Barriers to household risk management: evidence from India
Financial engineering offers the potential to significantly reduce the consumption fluctuations faced by individuals, households, and firms. Yet much of this potential remains unfulfilled. This paper studies the adoption of an innovative rainfall insurance product designed to compensate low-income Indian farmers in the event of insufficient rainfall during the primary monsoon season. We first document relatively low adoption of this new risk management product: Only 5-10 percent of households purchase the insurance, even though they overwhelmingly cite rainfall variability as their most ...
Report
Bad credit, no problem? Credit and labor market consequences of bad credit reports
Credit reports are used in nearly all consumer lending decisions and, increasingly, in hiring decisions in the labor market, but the impact of a bad credit report is largely unknown. We study the effects of credit reports on financial and labor market outcomes using a difference-in-differences research design that compares changes in outcomes over time for Chapter 13 filers, whose personal bankruptcy flags are removed from credit reports after seven years, to changes for Chapter 7 filers, whose personal bankruptcy flags are removed from credit reports after ten years. Using credit bureau ...
Discussion Paper
How and Why Do Consumers Use “Buy Now, Pay Later”?
In a previous post, we highlighted that financially fragile households are disproportionately likely to use “buy now, pay later” (BNPL) payment plans. In this post, we shed further light on BNPL’s place in its users’ household finances, with a particular focus on how use varies by a household’s level of financial fragility. Our results reveal substantially different use patterns, as more-fragile households tend to use the service to make frequent, relatively small, purchases that they might have trouble affording otherwise. In contrast, financially stable households tend to not use ...
Journal Article
Price Dispersion When Stores Sell Multiple Goods
A notable feature of most markets is that firms are multiproduct, in the sense that they offer for sale more than one single type of good. In this paper, I discuss a recent paper, Kaplan et al. (2016), that explores both empirically and theoretically price dispersion in a multiproduct setting. I discuss, with some detail, their empirical strategy and main empirical findings: a big part of price dispersion for a good in an area comes from stores with the same overall price level pricing individual goods in persistently different ways. I then go over the simple model proposed by the authors ...
Discussion Paper
Climate Change and Consumer Finance: A Very Brief Literature Review
Extant research shows that climate change can impose significant costs on consumers’ wealth and finances. Both sea-level rise and flooding from hurricane events led to high price declines and thus wealth loss for homes in coastal areas or in disaster-struck areas, with effects lingering for a number of years in some cases. In terms of consumer finance, while the average consumer is not always significantly negatively affected by a disaster, the vulnerable groups (those with low credit scores and who are low income) can be severely affected, experiencing higher rates of delinquencies and ...