Arbeitspapier
Fed liftoff and subprime loan interest rates: Evidence from the peer-to-peer lending market
On December 16th of 2015, the Fed initiated "liftoff," raising the federal funds rate range by 25 basis points and ending a 7-year regime of near-zero rates. We use a unique dataset of 640,000 loan-hour observations to measure the impact of liftoff on interest rates in the peer-to-peer lending segment of the subprime market. We find that the average interest rate dropped by 16.9-22.6 basis points. This holds for 14 and 28 day windows centered around liftoff, and is robust to the inclusion of a broad set of loan-level controls and fixed effects. We also find that the spread between high and low credit rating borrowers decreased by 16% and demonstrate that this was not generated by a change in the composition of borrowers along observable dimensions. Furthermore, we find no evidence that either result was driven by a collapse in demand for funds. Our results are consistent with an investor-perceived reduction in default probabilities; and suggest that liftoff provided a strong, positive signal about the future solvency of subprime borrowers, reducing their borrowing cost, even as short term rates increased in other markets.
- Sprache
-
Englisch
- Erschienen in
-
Series: Sveriges Riksbank Working Paper Series ; No. 319
- Klassifikation
-
Wirtschaft
Household Saving; Personal Finance
Interest Rates: Determination, Term Structure, and Effects
Monetary Policy
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- Thema
-
peer-to-peer lending
subprime consumer loans
Fed liftoff
monetary policy signaling
default channel
household debt
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Bertsch, Christoph
Hull, Isaiah
Zhang, Xin
- Ereignis
-
Veröffentlichung
- (wer)
-
Sveriges Riksbank
- (wo)
-
Stockholm
- (wann)
-
2016
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Bertsch, Christoph
- Hull, Isaiah
- Zhang, Xin
- Sveriges Riksbank
Entstanden
- 2016
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