Periodic Reporting for period 4 - EMPCONSFIN (Empirical Analyses of Markets for Consumer Financial Products and their Effects)
Período documentado: 2022-12-01 hasta 2024-05-31
The project studies the effects of information frictions in households' credit markets and the consequences of these frictions for durable good markets.
It is important for society because information frictions are one of the main sources of market inefficiencies that economists have identified. These inefficiencies applied to credit markets limit how these markets help consumers diversify their risks and smooth their consumption, for example through the purchase of a house. Hence, regulation and policy can potentially overcome these inefficiencies.
The main objective is to study whether and how information frictions determine and affect consumers' borrowing constraints. The project combines theoretical and empirical analyses of some markets for consumer financial products, such as mortgage markets, and durable goods, such as cars and car financing.
It is important for society because information frictions are one of the main sources of market inefficiencies that economists have identified. These inefficiencies applied to credit markets limit how these markets help consumers diversify their risks and smooth their consumption, for example through the purchase of a house. Hence, regulation and policy can potentially overcome these inefficiencies.
The main objective is to study whether and how information frictions determine and affect consumers' borrowing constraints. The project combines theoretical and empirical analyses of some markets for consumer financial products, such as mortgage markets, and durable goods, such as cars and car financing.
The project includes three more specific areas: 1) nonexclusive contracts in markets with asymmetric information; 2) regulation of consumer financial products; 3) the effects of borrowing constraints in durable good markets.
I dedicated broadly an equal share to these three areas. I am very happy with the outcomes obtained in WP2 and WP3, and less so in WP1. Specifically, progress on WP1 has been frustrated by the inability to secure data to test some of the theoretical results. I tried to obtain many different data sources on markets with non-exclusive contracts: credit card data; life insurance data; firm loans data. In some cases, I could not access the desired data (credit cards and life insurance). In some other cases in which I could access data (firm loans), the nature of the markets departed by some of the crucial assumptions of the theory, and thus the data turned out to be unsuitable for the desired empirical analysis. These are the uncertainties of scientific research. Nevertheless, my knowledge of the topic has considerably improved, and thus I hope to be able to make more progress on these topics in the future when appropriate data become available.
On WP2, I published two papers: one on price caps in credit card markets in the Journal of European Economic Association, and one on mortgage refinancing in the Journal of Financial Economics. In addition, one paper on price discrimination in mortgage markets is conditionally accepted by the American Economic Review, subject to the replication. I am extremely pleased with these publications. Moreover, in the last period of the grant (P4) I started a project on the pricing of bank deposits in the Euro area. Overall, I consider WP2 the most successful area of the grant. I have actively presented these papers at many conferences and seminars around the world, where they have garnered considerable interest from the community of scholars as well as relevant policymakers.
On WP3, I published two papers, one in the Review of Economic Studies on consumer durable goods markets in response to aggregate credit supply shocks, and one on household heterogeneity in car expenditures before and after the 2008 crisis in the Economic Journal. WP3 has been successful, allowing me to connect some work on household credit markets to macro outcomes.
Finally, I wrote a chapter of the Handbook of Industrial Organization that included many ideas from all these three areas. I think this chapter greatly enhanced the dissemination of these research papers within the scientific community.
I dedicated broadly an equal share to these three areas. I am very happy with the outcomes obtained in WP2 and WP3, and less so in WP1. Specifically, progress on WP1 has been frustrated by the inability to secure data to test some of the theoretical results. I tried to obtain many different data sources on markets with non-exclusive contracts: credit card data; life insurance data; firm loans data. In some cases, I could not access the desired data (credit cards and life insurance). In some other cases in which I could access data (firm loans), the nature of the markets departed by some of the crucial assumptions of the theory, and thus the data turned out to be unsuitable for the desired empirical analysis. These are the uncertainties of scientific research. Nevertheless, my knowledge of the topic has considerably improved, and thus I hope to be able to make more progress on these topics in the future when appropriate data become available.
On WP2, I published two papers: one on price caps in credit card markets in the Journal of European Economic Association, and one on mortgage refinancing in the Journal of Financial Economics. In addition, one paper on price discrimination in mortgage markets is conditionally accepted by the American Economic Review, subject to the replication. I am extremely pleased with these publications. Moreover, in the last period of the grant (P4) I started a project on the pricing of bank deposits in the Euro area. Overall, I consider WP2 the most successful area of the grant. I have actively presented these papers at many conferences and seminars around the world, where they have garnered considerable interest from the community of scholars as well as relevant policymakers.
On WP3, I published two papers, one in the Review of Economic Studies on consumer durable goods markets in response to aggregate credit supply shocks, and one on household heterogeneity in car expenditures before and after the 2008 crisis in the Economic Journal. WP3 has been successful, allowing me to connect some work on household credit markets to macro outcomes.
Finally, I wrote a chapter of the Handbook of Industrial Organization that included many ideas from all these three areas. I think this chapter greatly enhanced the dissemination of these research papers within the scientific community.
The research on the regulation of consumer financial products has been the most successful area of the grant. I published two papers: one on price caps in credit card markets in the Journal of European Economic Association, and one on mortgage refinancing in the Journal of Financial Economics. In addition, one paper on price discrimination in mortgage markets is conditionally accepted by the American Economic Review, subject to the replication of the empirical results. I am extremely pleased with these publications. Moreover, in the last period of the grant I started a project on the pricing of bank deposits in the Euro area. I have actively presented these papers at many conferences and seminars around the world, where they have garnered considerable interest from the community of scholars as well as relevant policymakers. These papers have some useful policy recommendations on the design of the optimal regulation in the specific markets studied. I expect to work more on this general area of research, building on the research I performed with this grant. For example, I plan to study the welfare effects of some pricing regulations in consumer financial products whereby suppliers are banned from charging different prices to their existing customers and new customers.