Credit Booms and Lending Standards Evidence From the Subprime Mortgage Market

This paper links the current sub-prime mortgage crisis to a decline in lending standards associated with the rapid expansion of this market. We show that lending standards declined more in areas that experienced larger credit booms and house price increases. We also find that the underlying market s...

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Bibliographic Details
Main Author: Dell'Ariccia, Giovanni
Other Authors: Laeven, Luc, Igan, Deniz
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2008
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Credit Booms and Lending Standards  |b Evidence From the Subprime Mortgage Market  |c Giovanni Dell'Ariccia, Luc Laeven, Deniz Igan 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2008 
300 |a 37 pages 
651 4 |a United States 
653 |a Depository Institutions 
653 |a Credit 
653 |a Income 
653 |a Real Estate 
653 |a Banks 
653 |a Finance 
653 |a Industries: Financial Services 
653 |a Monetary economics 
653 |a Financial institutions 
653 |a Personal income 
653 |a Housing Supply and Markets 
653 |a Monetary Policy, Central Banking, and the Supply of Money and Credit: General 
653 |a Micro Finance Institutions 
653 |a Housing; Prices 
653 |a Mortgages 
653 |a National accounts 
653 |a Personal Income, Wealth, and Their Distributions 
653 |a Money 
653 |a Property & real estate 
653 |a Loans 
653 |a Money Supply 
653 |a Prices 
653 |a Macroeconomics 
653 |a Credit booms 
653 |a Money Multipliers 
653 |a Money and Monetary Policy 
653 |a Housing prices 
700 1 |a Laeven, Luc 
700 1 |a Igan, Deniz 
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520 |a This paper links the current sub-prime mortgage crisis to a decline in lending standards associated with the rapid expansion of this market. We show that lending standards declined more in areas that experienced larger credit booms and house price increases. We also find that the underlying market structure mattered, with entry of new, large lenders triggering declines in lending standards by incumbent banks. Finally, lending standards declined more in areas with higher mortgage securitization rates. The results are consistent with theoretical predictions from recent financial accelerator models based on asymmetric information, and shed light on the relationship between credit booms and financial instability