Speaker: William Matcham
Affiliation: Royal Holloway University of London
Date and time: Wednesday, April 16, 2025 14:30 (Santiago, GMT-03:00)
Location:

• Auditorio at the Central Bank of Chile, Morandé 115, second floor.
• Online meeting

Registration: seminarios@bcentral.cl

Abstract: I use novel statement-level data on the 2010—2015 UK credit card market to show that lenders individualize contracts through risk-based credit limits. Though shared with other European credit markets, this feature contrasts with the US counterpart, where interest rates are also individualized. To quantify the implications of this distinction, I estimate a structural model relating individualized interest rates and credit limits to lender-specific credit scores. I evaluate a counterfactual where lenders can freely tailor prices and credit limits, which the UK environment precludes. Lenders control default risk with credit limits and use prices to extract surplus from inelastic borrowers.