IDEAS home Printed from https://ideas.repec.org/a/sae/amerec/v63y2018i2p166-186.html
   My bibliography  Save this article

Evaluating the Spatial Consequence of Interest Rate Ceiling Using a Spatial Regime Change Approach

Author

Listed:
  • Onyumbe E. Lukongo
  • Thomas Miller

Abstract

The article provides the empirical framework and steps toward the evaluation of the spatial consequence of the 17% interest rate ceiling in Arkansas using a new database from the trade association for installment lenders, the American Financial Services Association. The specific contribution of this study is to build and apply the installment loan accessibility index within the context of the spatial regime models. Results suggest strong evidence of spatial clustering of counties with similar (low or high) installment loan usage rates across the study area and two spatial regimes at work. The loan accessibility index is a strong predictor of the installment loan usage in the study area. That is, an increase in the loan acquisition costs due to the 17% interest rate cap puts interior counties’ residents at disadvantage compared with residents of border counties who can cross the borders to get small dollar loans. JEL Classifications : C51, C52, G23, G28

Suggested Citation

  • Onyumbe E. Lukongo & Thomas Miller, 2018. "Evaluating the Spatial Consequence of Interest Rate Ceiling Using a Spatial Regime Change Approach," The American Economist, Sage Publications, vol. 63(2), pages 166-186, October.
    • Handle: RePEc:sae:amerec:v:63:y:2018:i:2:p:166-186
    DOI: 10.1177/0569434517745490
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0569434517745490
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0569434517745490?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Annamaria Lusardi & Daniel Schneider & Peter Tufano, 2011. "Financially Fragile Households: Evidence and Implications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 83-150.
    2. Lukongo, Onyumbe Enumbe & Miller, Thomas, 2017. "Adverse Consequences of the Binding Constitutional Interest Rate Cap in the State of Arkansas," Working Papers 07446, George Mason University, Mercatus Center.
    3. Luc Anselin & Raymond J. G. M. Florax, 1995. "Small Sample Properties of Tests for Spatial Dependence in Regression Models: Some Further Results," Advances in Spatial Science, in: Luc Anselin & Raymond J. G. M. Florax (ed.), New Directions in Spatial Econometrics, chapter 2, pages 21-74, Springer.
    4. Thomas De Graaff & Raymond J.C.M. Florax & Peter Nijkamp & Aura Reggiani, 2001. "A General Misspecification Test for Spatial Regression Models: Dependence, Heterogeneity, and Nonlinearity," Journal of Regional Science, Wiley Blackwell, vol. 41(2), pages 255-276, May.
    5. Clark, William A. V. & Huang, Youqin & Withers, Suzanne, 2003. "Does commuting distance matter?: Commuting tolerance and residential change," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 199-221, March.
    6. Onyumbe E. Lukongo & Jon P. Rezek, 2018. "Investigating Spatial Dependence and Spatial Spillovers in African Agricultural Total Factor Productivity Growth," The American Economist, Sage Publications, vol. 63(1), pages 41-58, March.
    7. Guangqing Chi & Jun Zhu, 2008. "Spatial Regression Models for Demographic Analysis," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 27(1), pages 17-42, February.
    8. Christopher H. Wheeler, 2001. "A Note on the Spatial Correlation Structure of County‐Level Growth in the U.S," Journal of Regional Science, Wiley Blackwell, vol. 41(3), pages 433-449, August.
    9. McKernan, Signe-Mary & Ratcliffe, Caroline & Kuehn, Daniel, 2013. "Prohibitions, price caps, and disclosures: A look at state policies and alternative financial product use," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 207-223.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. J. Brandon Bolen & Gregory Elliehausen & Thomas W. Miller, 2020. "Do Consumers Need More Protection From Small‐Dollar Lenders? Historical Evidence And A Roadmap For Future Research," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1577-1613, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lukongo, Onyumbe Enumbe & Miller, Thomas, 2017. "Adverse Consequences of the Binding Constitutional Interest Rate Cap in the State of Arkansas," Working Papers 07446, George Mason University, Mercatus Center.
    2. Florax, Raymond J. G. M. & Folmer, Hendrik & Rey, Sergio J., 2003. "Specification searches in spatial econometrics: the relevance of Hendry's methodology," Regional Science and Urban Economics, Elsevier, vol. 33(5), pages 557-579, September.
    3. Terri Friedline & Nancy Kepple, 2017. "Does Community Access to Alternative Financial Services Relate to Individuals’ Use of These Services? Beyond Individual Explanations," Journal of Consumer Policy, Springer, vol. 40(1), pages 51-79, March.
    4. Jonathan Zinman, 2014. "Consumer Credit: Too Much or Too Little (or Just Right)?," The Journal of Legal Studies, University of Chicago Press, vol. 43(S2), pages 209-237.
    5. Florax, Raymond J. G. M. & Voortman, Roelf L. & Brouwer, Joost, 2002. "Spatial dimensions of precision agriculture: a spatial econometric analysis of millet yield on Sahelian coversands," Agricultural Economics, Blackwell, vol. 27(3), pages 425-443, November.
    6. López, Fernando & Matilla-García, Mariano & Mur, Jesús & Marín, Manuel Ruiz, 2010. "A non-parametric spatial independence test using symbolic entropy," Regional Science and Urban Economics, Elsevier, vol. 40(2-3), pages 106-115, May.
    7. Kiziltan, Mustafa, 2021. "Water-energy nexus of Turkey’s municipalities: Evidence from spatial panel data analysis," Energy, Elsevier, vol. 226(C).
    8. Jennifer Roberts & Karl Taylor, 2017. "Intra-household commuting choices and local labour markets," Oxford Economic Papers, Oxford University Press, vol. 69(3), pages 734-757.
    9. Filiz-Ozbay, Emel & Guryan, Jonathan & Hyndman, Kyle & Kearney, Melissa & Ozbay, Erkut Y., 2015. "Do lottery payments induce savings behavior? Evidence from the lab," Journal of Public Economics, Elsevier, vol. 126(C), pages 1-24.
    10. Zheng, Xinye & Li, Fanghua & Song, Shunfeng & Yu, Yihua, 2013. "Central government's infrastructure investment across Chinese regions: A dynamic spatial panel data approach," China Economic Review, Elsevier, vol. 27(C), pages 264-276.
    11. Alexander Klemm & Stefan Parys, 2012. "Empirical evidence on the effects of tax incentives," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(3), pages 393-423, June.
    12. Onyumbe Enumbe Ben Lukongo & Thomas W. Miller, 2022. "The cost of rate caps: Evidence from Arkansas," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(4), pages 881-909, December.
    13. Lv, Xueliang & Yu, Yue & Zhao, Xiaomeng & Si, Deng-Kui, 2023. "Minimum wage and household economic vulnerability: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 624-646.
    14. Yi Yang & Jie Li & Guobin Zhu & Qiangqiang Yuan, 2019. "Spatio–Temporal Relationship and Evolvement of Socioeconomic Factors and PM 2.5 in China During 1998–2016," IJERPH, MDPI, vol. 16(7), pages 1-24, March.
    15. Kartik Athreya & José Mustre-del-Río & Juan M Sánchez, 2019. "The Persistence of Financial Distress," The Review of Financial Studies, Society for Financial Studies, vol. 32(10), pages 3851-3883.
    16. Clara Zanon Brenck, 2022. "Inequality, Debt Dynamics and the Incidence of Tax Rates: Addressing Macroeconomic Instability in a Post Keynesian Model," Working Papers 2212, New School for Social Research, Department of Economics.
    17. Xiya Zhang & Haibo Hu, 2019. "Combining Data from Multiple Sources to Evaluate Spatial Variations in the Economic Costs of PM 2.5 -Related Health Conditions in the Beijing–Tianjin–Hebei Region," IJERPH, MDPI, vol. 16(20), pages 1-17, October.
    18. Reinhold Kosfeld & Christian Dreger & Hans-Friedrich Eckey, 2008. "On the stability of the German Beveridge curve: a spatial econometric perspective," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(4), pages 967-986, December.
    19. Chunil Kim & Choongik Choi, 2019. "Towards Sustainable Urban Spatial Structure: Does Decentralization Reduce Commuting Times?," Sustainability, MDPI, vol. 11(4), pages 1-28, February.
    20. Hermansson, Cecilia, 2018. "Can self-assessed financial risk measures explain and predict bank customers’ objective financial risk?," Journal of Economic Behavior & Organization, Elsevier, vol. 148(C), pages 226-240.

    More about this item

    Keywords

    interest rate ceiling; spatial regime change; loan acquisition cost; Arkansas; loan accessibility index;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:amerec:v:63:y:2018:i:2:p:166-186. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://journals.sagepub.com/home/aex .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.