How Do Regulators Influence Mortgage Risk: Evidence from an Emerging Market

31 Pages Posted: 15 Sep 2012 Last revised: 6 Apr 2023

See all articles by John Y. Campbell

John Y. Campbell

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Tarun Ramadorai

Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Benjamin Ranish

Board of Governors of the Federal Reserve System

Date Written: September 2012

Abstract

To understand the effects of regulation on mortgage risk, it is instructive to track the history of regulatory changes in a country rather than to rely entirely on cross- country evidence that can be contaminated by unobserved heterogeneity. However, in developed countries with fairly stable systems of financial regulation, it is difficult to track these effects. We employ loan-level data on over a million loans disbursed in India over the 1995 to 2010 period to understand how fast-changing regulation impacted mortgage lending and risk. We use cross-sectional differences in the time- series variation of delinquency rates, conditional on initial interest rates, to detect the effects of regulation on mortgage delinquencies.

Suggested Citation

Campbell, John Y. and Ramadorai, Tarun and Ranish, Benjamin, How Do Regulators Influence Mortgage Risk: Evidence from an Emerging Market (September 2012). NBER Working Paper No. w18394, Available at SSRN: https://ssrn.com/abstract=2147104

John Y. Campbell (Contact Author)

Harvard University - Department of Economics ( email )

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Tarun Ramadorai

Imperial College London ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Benjamin Ranish

Board of Governors of the Federal Reserve System ( email )

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