Forecasting and explaining aggregate consumer credit delinquency behaviour

J. Crook, J. Banasik

Research output: Contribution to journalArticlepeer-review

Abstract

We model aggregate delinquency behaviour for consumer credit (including credit card loans and other consumer loans) and for residential real estate loans using data up until 2008. We test for cointegrating relationships and then estimate short run error correction models. We find evidence to support the portfolio explanations of declines in credit quality for consumer and for real estate loans, but support for the reduced stigma explanation was restricted to real estate loans. Evidence supportive of household-level explanations of irrational borrowing and unexpected net income shocks was found for consumer and real estate loans, but evidence of strategic default was restricted to the volume of consumer loans and real estate loans, and not for credit cards. We also found that the error correction model gave forecasts of the volume of delinquent consumer debt which were of an accuracy comparable to that of an ARIMA model.
Original languageEnglish
Pages (from-to)145–160
Number of pages9
JournalInternational Journal of Forecasting
Volume28
Issue number1
Early online date22 Mar 2011
DOIs
Publication statusPublished - Jan 2012

Keywords

  • Finance
  • Co-integration
  • ARIMA models
  • Error correction models
  • Time series
  • Unit roots

Fingerprint Dive into the research topics of 'Forecasting and explaining aggregate consumer credit delinquency behaviour'. Together they form a unique fingerprint.

Cite this