An Empirical Study on Credit Card Loan Delinquency in Korea

Abstract

This study investigates credit card loan delinquency in Korea. We define three states - no delinquency, delinquency, and serious delinquency - and test the transition probabilities between them using quarterly observed account-level data. Our findings have several economic implications. First, factors that affect delinquency risk can differ from those that affect the transition to serious delinquency. Second, the recent increase in the number of seriously delinquent accounts can be attributed to changes in the distribution of borrower ages. Third, macroeconomic conditions - especially differences in growth between the gross domestic product and consumption - have led to the recent increase in delinquent accounts.

Keywords: delinquency risk, credit card loan, multinomial logit

JEL Classification: D12, G21, G33