Date/Time Date(s) - 18/09/202411:30 am - 12:30 pm
Burcu Eyigungor, Economic Advisor and Economist at the Federal Reserve Bank of Philadelphia, will present to our economics graduate students and faculty on Wednesday, September 18th, 11:30am-12:30pm (EST) in KTH 334.
Burcu will present the paper “Heterogeneity in the Credit Card Market”.
Abstract
A relatively new administrative data set is used to establish patterns regarding contract terms, usage, and performance of anonymized individual credit card accounts. Accounts are distinguished by account holders’ income and credit score at origination. It is found that con-tract interest rates decline with credit score and income while credit-limit-to-income ratios rise with credit score but decline with income. Utilization and default rates decline sharply with credit score and income. The workhorse heterogeneous agent macro model augmented with a credit card industry is developed to explain these patterns. If individuals differ by discount factors and default costs, the model can account for almost all of these patterns.The model predicts large spreads between interest rates and default frequencies, as observed,despite the competitive provision of credit card contracts. It implies that the credit card industry lowers the average MPC of consumers, especially for low-income individuals.
View Burcu Eyigungor’s professional website.