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Racial differences in short-run earnings stabilityand implications for credit markets

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  • Raphael W. Bostic

Abstract

This paper examines the claim that observed racial differences in rejection rates for mortgage applications, which persist after controlling for many relevant factors, are due to racial differences in short-run earnings stability, which has not typically been included in empirical tests. The evidence does not support the proposition that blacks suffer from greater earnings instability than comparable whites, as few consistent significant differences between black and white earnings volatility are found. Only in the case of drastic earnings shocks with persistent effects does the possibility of significant racial differences reasonably remain. In general, racial differences in earnings stability appear to be minor and are unlikely to result in substantial differences in creditworthiness

Suggested Citation

  • Raphael W. Bostic, 1997. "Racial differences in short-run earnings stabilityand implications for credit markets," Finance and Economics Discussion Series 1997-34, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:1997-34
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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