Assessing the Shape of the Distribution of Interest Rates: Lessons from French Individual Data

79 Pages Posted: 22 Sep 2010

Date Written: April 1, 2008

Abstract

Estimating mixture models still raises numerous questions, both theoretical and empirical. However, this class of model appears quite powerful for a parcimonious modelization of ill-behaved distribution, as it is the case with loans rate vis-à-vis the private sector collected by the Banque de France from a panel of French credit institutions. Indeed, the heterogeneity of the credit market is a well-established fact which translate into high variability of interest rates at the micro level. Thus, we provide a detailed analysis of 11 categories of loans to non-financial corporations and households, and compare various procedures for the estimation of mixture models with a large number of components. The results allow us to identify modes in the distributions of interest rates and to clarify the nature of heterogeneity in the data in relation with the specialization of some part of the banking sector on particular instruments. Lastly, our methodology allows us to quantify the effects of the usury law on the upper side of the distribution, and to propose a preliminary estimate of eviction rates resulting from this regulation.

Keywords: Mixture Model, Usury Law, Credit Market

JEL Classification: C24, C52, E43

Suggested Citation

Lacroix, Renaud, Assessing the Shape of the Distribution of Interest Rates: Lessons from French Individual Data (April 1, 2008). Banque de France Working Paper No. 206, Available at SSRN: https://ssrn.com/abstract=1680222 or http://dx.doi.org/10.2139/ssrn.1680222

Renaud Lacroix (Contact Author)

Banque de France ( email )

Paris
France

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