English, Article, Journal or magazine article edition: Adverse Selection in Credit Markets: Evidence from a Policy Experiment Ashok Rai; Stefan Klonner

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Bookmark: http://trove.nla.gov.au/version/119984
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Adverse Selection in Credit Markets: Evidence from a Policy Experiment
Author
  • Ashok Rai
  • Stefan Klonner
Physical Description
  • preprint
Notes
  • We test if riskier borrowers are willing to pay higher interest rates than safer borrowers are as predicted by Stiglitz and Weiss (1981). The data are from an Indian financial institution where interest rates are determined by competitive bidding. The government imposed an interest rate ceiling in 1993 and then relaxed the ceiling in 2002. Changes in default patters are analyzed before and after each of these policy changes. We find no evidence of adverse selection despite the use of collateral as a screening device. This study isolates adverse selection from moral hazard and controls for information on riskiness observed by the lender but not by the researcher.
  • Defaults, Risk, Auctions, Asymmetric Information
  • RePEc:wil:wileco:2007-1
Language
  • English
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