How Unsecured Credit Policies Influence Mortgage and Unsecured Loan Defaults

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5 Citations (Scopus)


Before the global financial crisis, the proportion of households defaulting on the mortgage while remaining current on the unsecured loan was almost the same as the proportion of households current on the mortgage but defaulting on the unsecured loan. After the crisis, the former ratio became higher than the latter. By using a heterogeneous agent model with the mortgage and the unsecured loan, I examine how the order of defaults changed before and after the crisis. I then analyze the impacts of unsecured credit policies on households' mortgage and unsecured loan defaults. My quantitative exercise shows that both default rates can decrease as the cost for unsecured loan defaults increases.

Original languageEnglish
Pages (from-to)1271-1304
Number of pages34
JournalJournal of Money, Credit and Banking
Issue number5
Publication statusPublished - 2020 Aug 1

Bibliographical note

Funding Information:
I thank the editor Sanjay Chugh, two anonymous referees, and seminar participants at Yonsei University, the Asian Meeting of the Econometric Society, and the 12th Joint Economics Symposium of Five Leading East Asian Universities for helpful comments. This research was supported by the Yonsei University Research Fund of 2018‐22‐0015.

Publisher Copyright:
© 2020 The Ohio State University

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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