Credit Loss Elasticity Model (Rule of Thumb)
20 Pages Posted: 25 Jun 2019
Date Written: June 21, 2019
Elasticity is a well-known concept that has been applied in numerous diverse situations. This study develops an elasticity relation between loan balances and their associated credit loss. This elasticity relation can be applied as a “rule of thumb” approach for measurement and forecasting. The empirical results are significant at conventional levels for the elasticity.
Keywords: CECL standard, Estimated losses, Financial institutions, Economic elasticity
JEL Classification: M41,G21
Suggested Citation: Suggested Citation