Relationships and Rationing in Consumer Loans

Posted: 1 Nov 1999

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Abstract

We empirically examine how relationships between individual households and their creditors affect the probability of being credit-rationed. Using a data set where the credit rationing of individual households is observed directly, we show that relationship duration and the number of activities between a family and a potential lender significantly lower the probability of being credit-rationed. Additionally, we examine the relative role of relationships in determining the interest rates of two consumer loans--a mortgage loan and a "special purposes" loan-- and show that mortgage loan rates are driven less by relationship factors than the special purposes loan rates.

JEL Classification: G21

Suggested Citation

Chakravarty, Sugato and Scott, James S., Relationships and Rationing in Consumer Loans. Available at SSRN: https://ssrn.com/abstract=171971

James S. Scott

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

No contact information is available for Sugato Chakravarty

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