Long-run price elasticities of demand for credit: Evidence from a countrywide field experiment in Mexico

Arbeitspapier

The long-run price elasticity of demand for credit is a key parameter for intertemporal modeling, policy levers, and lending practice. We use randomized interest rates, offered across 80 regions by Mexico’s largest microlender, to identify a 29-month dollars-borrowed elasticity of -1.9. This elasticity increases from -1.1 in year one to -2.9 in year three. The number of borrowers is also elastic. Credit bureau data does not show evidence of crowd-out. Competitors do not respond by reducing rates, perhaps because Compartamos’ profits are unchanged. The results are consistent with multiple equilibria in loan pricing.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economic Growth Center Discussion Paper ; No. 1024

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Macroeconomic Analyses of Economic Development ; Microeconomic Analyses of Economic Development
• Subject: microcredi ; interest rates ; interest rate policy ; interest rate elasticities ; Zins ; Kredit ; Preiselastizität ; Mikrofinanzierung ; Mexiko

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Karlan, Dean ; Zinman, Jonathan
• Event: Veröffentlichung
• (who): Yale University, Economic Growth Center
• (where): New Haven, CT
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/98196
• Last update: 10.03.2025, 11:44 AM CET