CFI | Research Highlight
Consumer Credit Markets
A new essay in NBER's The Reporter from Christopher Palmer
Consumer credit markets play a pivotal role both in the macroeconomy and in people’s lives because they are tightly linked to consumption, financial distress, household investment, financial inclusion, and monetary policy transmission.
Put another way, what happens in credit markets doesn’t stay in credit markets. Both supply-side and demand-side disruptions and dysfunctions in credit markets have real effects on outcomes as widely varying as car prices, bankruptcy, education, and where people live. Public policy reflects this importance, with significant regulatory efforts dedicated to supporting healthy credit markets, including consumer financial protection, mortgage guarantees, bankruptcy statutes, and banking supervision. In this article, I review my recent research highlighting the value of understanding both credit supply and credit demand to appreciate the many ways credit-market imperfections affect household financial wellbeing and the broader economy. I conclude with a discussion of promising areas for research to inform public policy issues.
Christopher Palmer is the Eastman Kodak Associate Professor of Management and an Associate Professor of Finance at the MIT Sloan School of Management where he teaches corporate finance. His research focuses on how credit, real estate, and labor markets respond to periods of significant upheaval.