Market Structure and the Availability of Credit: Evidence from Auto Credit

41 Pages Posted: 11 Feb 2022

See all articles by Donghoon Lee

Donghoon Lee

Federal Reserve Bank of New York; New York University

Michael Lee

Federal Reserve Banks - Federal Reserve Bank of New York

Reed Orchinik

MIT Sloan

Date Written: November 18, 2021

Abstract

How do changes in market structure impact accessibility to credit? Following the introduction of publicly disclosed Comprehensive Capital Analysis and Review stress tests, market shares of affected banks shrunk by about 2.1 pp. Impact significantly differs across regions, with shares dropping an additional 1.1 pp in non-urban areas. Credit substitution by other lenders is imperfect. Originations drop in areas more reliant on CCAR credit. Borrowing conditions diverge as well: non-urban counties see fewer subprime originations and average borrowing costs rise. Our results suggest that policies geared toward financial stability asymmetrically impacted local credit conditions and inadvertently amplified the urban-rural divide.

Keywords: Household finance, consumer credit, stress tests, availability of credit, market structure

JEL Classification: G51, G28, G21, G23, R51

Suggested Citation

Lee, Donghoon and Lee, Michael and Orchinik, Reed, Market Structure and the Availability of Credit: Evidence from Auto Credit (November 18, 2021). MIT Sloan Research Paper , Available at SSRN: https://ssrn.com/abstract=3966710 or http://dx.doi.org/10.2139/ssrn.3966710

Donghoon Lee

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-8699 (Phone)
212-720-1844 (Fax)

New York University

NY
United States

Michael Lee (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Reed Orchinik

MIT Sloan ( email )

100 Main Street
E62
Cambridge, MA 02142
United States

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