Micro Rules, Macro Consequences: A Structural Approach to Consumer Credit Regulation

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Analysis of macroeconomic shocks on credit performance reveals complex dynamics in consumer credit, suggesting new regulatory frameworks.

Positive income shocks paradoxically increase charge-off and delinquency rates, indicating greater borrower risk-taking.
Unemployment shocks contemporaneously lower charge-offs, consistent with lender forbearance or delayed loss recognition.
A multi-variable structural vector autoregression model was utilized to analyze 121 quarterly observations from 1995 to 2023.
Static policy tools, like a 10% APR cap, risk constraining credit access for high-risk borrowers, advocating for a dynamic regulatory approach.

Masaaki Yoshimori (2025) studied this question.

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