We investigate the significance of borrowing constraints in the market for consumer loans. Using data from the Consumer Expenditure Survey on auto loan contracts we estimate the elasticities of loan demand with respect to interest rate and maturity. We find that, with the exception of high income households, consumers are very responsive to maturity and less responsive to interest rate changes. Both elasticities vary with household income, with the maturity elasticity decreasing and the interest rate elasticity increasing with income. We argue that these results are consistent with the presence of binding credit constraints in the auto loan market.
Authors

Research Fellow Yale University
Pinelopi is a Research Fellow and the Elihu Professor of Economics and an Affiliate of the Economic Growth Center at Yale University.

Ekaterini Kyriazidou
Journal article details
- DOI
- 10.1111/j.1468-2354.2008.00485.x
- Publisher
- Wiley
- Issue
- Volume 49, Issue 2, May 2008
Suggested citation
Koujianou Goldberg, P and Kyriazidou, E. (2008). 'Credit Constraints in the market for consumer durables: evidence from micro data on car loans' 49, Issue 2(2008)
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