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Factors affecting delinquency of household credit in the U.S.: does consumer sentiment play a role?
journal contribution
posted on 2020-04-01, 00:00 authored by Ikm Wadud, Huson Ali Ahmed, Xueli TangXueli TangIn this study, we provide both theoretical and empirical evidence on the determinants of household loan delinquency for home ownership, credit card and auto loans for the U.S. states in a panel framework over a period from 2003 through 2017. In particular, we examine the impact of consumer sentiments on loan delinquency rates. We show that improved current consumer sentiment significantly induce lower mortgage, credit card and automobile loan defaults in the American states subdivided into four different regions. We also find that the higher overall and expected consumer sentiment raise loan delinquencies. Implicit in this finding is the apparently excessive and inappropriate expansion of loans in the U.S. economy in the face of consumers’ optimism, which in turn, provides an intuitive understanding of the circumstances that could precede a depression or outbreak of anomalies in the financial sector. Our general findings further exhibit significant positive effect of unemployment rate and mostly adverse effect of per capita income on mortgage and automobile loan delinquency rates. The results provide some compelling evidence with regard to the effect of consumer confidence on household credit delinquency rates across various states in the U.S. and are robust to alternative measures of income and mortgage rates.
History
Journal
North American journal of economics and financeVolume
52Article number
101132Pagination
1 - 17Publisher
ElsevierLocation
Amsterdam, The NetherlandsPublisher DOI
ISSN
1062-9408Language
engPublication classification
C1 Refereed article in a scholarly journal; C Journal articleUsage metrics
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