Relationships and Rationing in Consumer Loans
Posted: 1 Nov 1999
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: Suggested Citation