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Identifying "Default Thresholds" in Consumer Liabilities Using High Frequency Data

Author

Listed:
  • Don Schlagenhauf

    (Federal Reserve Bank of St Louis)

  • Carlos Garriga

    (Federal Reserve Bank of St. Louis)

Abstract

The concept of "default threshold" captures the notion of a level of debt that it is not sustainable that results in default. This paper constructs different measures based on the dynamics of the monthly debt payment to after-tax income ratio. The preliminary examination using data from the Consumer Credit Panel suggest that some of these measures have some predictive content when compared to alternative measures based on FICO scores. A quantitative model of default behavior is constructed to replicate the dynamic patterns observed in the data.

Suggested Citation

  • Don Schlagenhauf & Carlos Garriga, 2017. "Identifying "Default Thresholds" in Consumer Liabilities Using High Frequency Data," 2017 Meeting Papers 1305, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:1305
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    References listed on IDEAS

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    4. Meta Brown & Sarah Stein & Basit Zafar, 2015. "The Impact of Housing Markets on Consumer Debt: Credit Report Evidence from 1999 to 2012," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 175-213, March.
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