An empirical study on credit card loan delinquency

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Following the Basel II convention, consumer credit default is commonly defined as delinquency beyond a period of 90 days. In this study, rather than considering default as a binary variable, we dissect delinquency states further to investigate default behavior in greater detail. As such, we define three states no delinquency, delinquency and serious delinquency and estimate the probabilities of the transitions between states using extensive panel data from Korea, covering a wide range of behavioral information. Our findings have several economic implications. First, the factors that affect delinquency risk can differ from those that affect the transition from delinquency to serious delinquency. Second, the recent increase in the number of seriously delinquent accounts can be attributed to changes in the borrower age distribution. Third, macroeconomic conditions, especially differences in gross domestic product and consumption growth, have led to the recent increase in delinquent accounts. Fourth, the debt-to-income (DTI) ratio has a profound effect on transitions between delinquency states and thus affects both recovery and delinquency. Furthermore, this result is robust to controls for demographic and macroeconomic factors.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2018-09
Language
English
Article Type
Article
Keywords

CONSUMER-CREDIT; MODEL; BANKRUPTCY; DEBT

Citation

ECONOMIC SYSTEMS, v.42, no.3, pp.437 - 449

ISSN
0939-3625
DOI
10.1016/j.ecosys.2017.11.003
URI
http://hdl.handle.net/10203/245894
Appears in Collection
MT-Journal Papers(저널논문)
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