The nature of credit rationing in the United Kingdom mortgage market |
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| Affiliation: | 1. Sapienza University of Rome, Italy;2. Universidad Complutense de Madrid and ICAE, Spain;3. University of Rome Tor Vergata & CESifo, Italy;1. Institute of Economic Research, Hitotsubashi University, Japan;2. Faculty of Economics, University of Tokyo, Japan;3. Faculty of Global Management, Chuo University and RIETI, Japan;4. Graduate School of Economics, Osaka University, Japan;1. Center for International Development at Harvard University, 79, J.F.K. Street, MA, Cambridge, 02138, USA;2. Institutes for Employment Research (IAB), United States;3. Massachusetts Institute of Technology, The MIT Media Lab, United States |
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| Abstract: | This paper addresses the problem of how to estimate market demand functions for finance in the presence of rationing within the context of the U.K. house mortgage market. Two distinct approaches are outlined. The first, and more traditional, focuses on American studies in which non-price terms are assumed to adjust so as, in combination with price, to produce market clearing. In contrast, the approach used in the present study conjectures that non-interest-rate terms are varied so as to discriminate among borrowers, satisfying some but leaving the market uncleared. Empirical tests, using U.K. data, offer some support for this alternative approach. The paper offers some thoughts on credit rationing, and outlines possible avenues for further research into this important and current topic. |
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