Information asymmetry and competition in credit markets: the pricing of overdraft loans in Brazil

dc.contributor.affiliationFGV
dc.contributor.authorMello, João Manoel Pinho de
dc.contributor.unidadefgvEscolas::EPGEpor
dc.date.accessioned2014-11-24T13:45:55Z
dc.date.available2014-11-24T13:45:55Z
dc.date.issued2005-02-17
dc.description.abstractThis paper evaluates how information asymmetry affects the strength of competition in credit markets. A theory is presented in which adverse selection softens competition by decreasing the incentives creditors have for competing in the interest rate dimension. In equilibirum, although creditors compete, the outcome is similar to collusion. Three empirical implications arise. First, interest rate should respond asymmetrically to changes in the cost of funds: increases in cost of funds should, on average, have a larger effect on interest rates than decreases. Second, aggressiveness in pricing should be associated with a worseing in the bank level default rates. Third, bank level default rates should be endogenous. We then verify the validity of these three empirical implications using Brazilian data on consumer overdraft loans. The results in this paper rationalize seemingly abnormallly high interest rates in unsecured loans.eng
dc.identifier.urihttps://hdl.handle.net/10438/12569
dc.language.isoeng
dc.publisherEscola de Pós-Graduação em Economia da FGVpor
dc.relation.ispartofseriesSeminários de pesquisa econômica da EPGEpor
dc.rightsTodo cuidado foi dispensado para respeitar os direitos autorais deste trabalho. Entretanto, caso esta obra aqui depositada seja protegida por direitos autorais externos a esta instituição, contamos com a compreensão do autor e solicitamos que o mesmo faça contato através do Fale Conosco para que possamos tomar as providências cabíveispor
dc.subject.areaEconomiapor
dc.subject.bibliodataEmpréstimospor
dc.subject.bibliodataEconometriapor
dc.subject.bibliodataInformação assimétricapor
dc.titleInformation asymmetry and competition in credit markets: the pricing of overdraft loans in Brazileng
dc.typeWorking Papereng
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