{"id":846,"date":"2016-03-26T15:22:57","date_gmt":"2016-03-26T13:22:57","guid":{"rendered":"http:\/\/www.christophbertsch.com\/?p=846"},"modified":"2017-01-18T17:52:43","modified_gmt":"2017-01-18T15:52:43","slug":"new-paper-on-the-fed-liftoff","status":"publish","type":"post","link":"https:\/\/www.christophbertsch.com\/?p=846","title":{"rendered":"New paper on online lending and monetary policy; Sveriges Riksbank Working Paper Series No. 319"},"content":{"rendered":"<p><strong><a title=\"Fed Liftoff and Subprime Loan Interest Rates: Evidence from the Peer-to-Peer Lending Market\" href=\"http:\/\/www.riksbank.se\/Documents\/Rapporter\/Working_papers\/2016\/rap_wp319_160422.pdf\" target=\"_blank\">&#8220;Fed Liftoff and Subprime Loan Interest Rates: Evidence from the Peer-to-Peer Lending Market&#8221;<\/a><\/strong> with <a title=\"Isaiah Hull's homepage\" href=\"http:\/\/www.isaiahhull.com\" target=\"_blank\">Isaiah Hull (Sveriges Riksbank)<\/a> and <a title=\"Xin Zhang's homepage\" href=\"http:\/\/sites.google.com\/site\/zhangxinphd\/\" target=\"_blank\">Xin Zhang (Sveriges Riksbank)<\/a>\u00a0(First version: March 2016)<\/p>\n<ul>\n<li>Abstract:<\/li>\n<\/ul>\n<div class=\"page\" title=\"Page 1\">\n<div class=\"layoutArea\">\n<div class=\"column\">\n<p>On December 16th of 2015, the Fed initiated \u201cliftoff,\u201d raising the federal funds rate range by 25 basis points and ending a 7-year regime of near-zero rates. We use a unique dataset of 640,000 loan-hour observations to measure the impact of liftoff on interest rates in the peer-to-peer lending segment of the subprime market. We find that the average interest rate dropped by 16.9-22.6 basis points. This holds for 14 and 28 day windows centered around liftoff, and is robust to the inclusion of time dummies and a broad set of loan-level controls. We also find that the spread between high and low credit rating borrowers decreased by 16% and demonstrate that this was not generated by a change in the composition of borrowers along observable dimensions. Furthermore, we find no evidence that either result was driven by a collapse in demand for funds. Our results are consistent with an investor-perceived reduction in default probabilities; and suggest that liftoff provided a strong, positive signal about the future solvency of subprime borrowers, reducing their borrowing cost, even as short term rates increased in other markets.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<ul>\n<li>Keywords: peer-to-peer lending, subprime consumer loans, Fed liftoff, monetary policy signaling, default channel, household debt.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Fed Liftoff and Subprime Loan Interest Rates: Evidence from the Peer-to-Peer Lending Market&#8221; with Isaiah Hull (Sveriges Riksbank) and Xin Zhang (Sveriges Riksbank)\u00a0(First version: March 2016) Abstract: On December 16th of 2015, the Fed initiated \u201cliftoff,\u201d raising the federal funds &hellip; <a href=\"https:\/\/www.christophbertsch.com\/?p=846\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,52,55,50,54,49,53,48,51],"tags":[],"class_list":["post-846","post","type-post","status-publish","format-standard","hentry","category-academic-research","category-consumer-credit","category-crowdfunding","category-fintech","category-household-debt","category-monetary-policy","category-monetary-policy-signaling","category-p2p-lending","category-subprime"],"_links":{"self":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/846","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=846"}],"version-history":[{"count":9,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/846\/revisions"}],"predecessor-version":[{"id":903,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/846\/revisions\/903"}],"wp:attachment":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=846"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=846"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=846"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}