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# Questions tagged [credit]

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1 answer
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### Why does higher income lead to higher consumption spending in credit-constrained households?

Title. Higher income can come from better job, or moving from part-time to full-time employment.
1 vote
1 answer
48 views

### Shouldn't the answers c & d be correct? [closed]

Credit used for investment purposes can lead to an increase in total spending and an increase in total output, with the possibility of the total output increasing either more or less than the total ...
0 votes
0 answers
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### Does billionaires take loan secured by stocks to reinvest in their company?

Can billionaire use his company stocks to get loan, then invest it in his company, and get even bigger loan secured by stocks? And repeat this forever. I guess this wouldn't work, but why?
0 votes
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44 views

### By how much does debt exceed credit in major currencies?

Fiat currency is created by issuing loans. Assume 100 crowns (a non-specific currency) existed before the crown became a fiat currency. Every time a new 100 crown loan is made, 100 crowns of credit ...
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1 vote
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### Credit profile bank dataset for Machine learning

Can you advise please any credit profile Bank free available datasets for Markov chain and machine learning computational experiments? For my student masters thesis. Thank you.
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### Calculating Effective Maturity with Negative Cash Flows

The formula for effective maturity. Suppose that an installment plan also shows additional borrowings of a debtor. That is, at some point in time (other than the inception date) the borrower is given ...
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3 votes
1 answer
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### Banerjee and Duflo - Do Firms Want to Borrow More? - Theoretical model

I am reading Banerjee and Duflo's (2014) seminal paper on credit constraints faced by firms in India. In their theoretical model (see page 11, namely figure 1), they show that, if firms are credit not ...
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1 vote
0 answers
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### Why do I keep hearing that Americans are running down their pandemic savings but the data doesn't show that?

I keep hearing on the news etc. that Americans are running down their savings, even from well known figures like the head of Blackrock etc. Granted I have not been looking at economists specifically. ...
1 vote
1 answer
43 views

### How do perpetual bonds help the banks fulfill their capital requirements?

This is a follow-up question to Loans that don't have to be paid back (only the interest). In the Wikipedia article on perpetual bonds one reads "Most perpetual bonds issued in the present day ...
4 votes
3 answers
559 views

### Loans that don't have to be paid back (only the interest)

A normal loan has to be paid back with interest. Every now and then there are interest-free loans where only the loan has to be paid back but no interest, e.g. among relatives or friends, but also as ...
2 votes
0 answers
19 views

### What is the appropriate interpretation of the impact of an aging demographic on the supply of credit?

In the case of Japan, one of the more prominent examples of an aging society, loan growth has slowed at what appears to be a consistent rate with its declining workforce. However the US appears to be ...
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10 votes
2 answers
2k views

### What are the causes of negative real interest rates?

I am familiar with the real interest rates equation which states that real interest rate = nominal interest rate - expected inflation rate. What I am failing to fully grasp, however, is why would ...
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0 votes
1 answer
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### Cash flow of a loan (perspective of a bank)

if you receive a loan from a bank, how does the cash flow of the bank look like? I found the following: https://fincomplete.com/ratgeber/artikel/wie-berechnet-die-bank-meine-kreditzinsen-2 (...
0 votes
1 answer
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### Why are so many economists critical of central banks manipulating markets and creating artificial demand?

When demand for liquidity outstrips supply (rate increase in a credit crunch) then the law of supply states that quantity supplied also increases with price (rate decrease provided demand stays ...
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0 votes
1 answer
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### Does bank loan support affect companies in negative way?

I'm new to the economics exchange environment. My question may seem amateurish, but I did not find a satisfactory result by doing the necessary literature search. A question that has been on my mind ...
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1 vote
0 answers
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### How Many Securities do CRAs Rate Every Year?

I am writing a paper using this database and want some idea of if the securities in this dataset are a comprehensive list of all the ratings that credit ratings agencies (CRAs) have done, or just a ...
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-3 votes
1 answer
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### Description of variables for a credit scoring model [closed]

I'm working with a credit scoring model. I have a dataset that includes 42 variables. I don't know what are mean 6 variables: remaining_mat live_status repaid_status months_since_2mia avg_mia_6m ...
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0 votes
1 answer
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### Perfectly functioning credit markets and consumer saving

Today in my Macroeconomics lecture, while covering the Real Intertemporal Model with Investment (Chapter 11 of Williamson's Macroeconomics), my professor proponed that a key assumption to not make ...
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1 vote
1 answer
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### Is there inverse relationship betweet prices of interest-bearing assets and the interest rate?

I was wondering about why investors converting out of interest-bearing assets into money in the money market cause the interest rate to increase. Then I remembered that there is inverse relationship ...
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2 votes
2 answers
346 views

### Does people paying back their debts cause deflation?

The majority of the monetary supply results from credit, with every loan creating pairs of assets and liabilities representing the same underlying value. Considering that every time someone pays back ...
2 votes
4 answers
278 views

### How can people save in a equilibrium economy?

Two people on a desert island: John produces 100kg potatoes and sells them to Paul for \$100. Paul catches 100kg fish and sells it to John for \$100. GDP is \$200\$, right? Next year, they improve ...
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9 votes
4 answers
3k views

### Mortgage loans from foreign banks at lower interest rates

I had a thought - what if I live in a relatively poor country like let's say Russia and I would like to buy a house. In order to do that, I need to take a mortgage loan. In Russia however, interest ...
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0 votes
1 answer
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### Can a commercial bank lend money from transaction/checking account as it would from a deposit account?

Transaction/checking accounts are highly liquid - M1 Deposit accounts are less liquid - M2 Per fractional reserve system, banks lend deposited money as credit to clients provided they keep a reserve ...
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2 votes
2 answers
161 views

### Higher interest rates and default probabilities for longer loan term

I am analyzing LendingClub data with two available loan terms: 36 and 60 months. In the course of my analysis I have spotted that both the interest rates associated with each loan and the default ...
0 votes
3 answers
441 views

### Why does the nominal interest rate equal 25% in this problem, instead of 16.4%?

My reasoning: The nominal interest rate = the real interest rate + the expected inflation rate. We need to calculate the nominal interest rate. We know the expected inflation rate, so the only problem ...
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1 vote
0 answers
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### Interventions during the current Corona crisis: Government credits

In the light of the current public health crisis caused by COVID-19, I would like to know more about how government or central bank interventions are supposed to influence and limit the economic ...
0 votes
1 answer
56 views

### Can you recursively forecast one variable using two variables?

My question is probably very elementary but I haven't been able to find an explanation of recursive forecasting that I fully understand. I've read a journal article that seemed to recursively ...
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1 vote
1 answer
469 views

### Tendency of the rate of profit to fall

https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to_fall The tendency of the rate of profit to fall (TRPF) is a hypothesis in economics and political economy, most famously expounded by ...
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0 votes
1 answer
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### statistics about loaning tradeoff

It is very likely that Banks have more loans that have been repaid compared to loans that have not been repaid. Otherwise the bank would lose money instead of money. (otherwise the bank will go ...
1 vote
1 answer
68 views

### Why would creditors accept a comfort letter that can't be legally enforced, from borrowers that refuses to guarantee?

Prof Richard Taylor, Damian Taylor. Contract Law Directions (6 edn, 2019). p 65. Para 1. You might be wondering why businessmen bother to make an agreement if it has no legal effect—is it worth ...
1 vote
0 answers
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### Investments during recession

During Recession, banks loans decrease which leads to financial constraints and ultimately Investment suffers and declines. my question is - "Are loans lower because of demand or supply?" My ...
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1 vote
1 answer
895 views

### Why loans/debt can cause inflation?

I learned that inflation can be a result of more loans or debt. When there are too much borrowers in the country, people will have more money to spend and the amount of products is the same so prices ...
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1 vote
1 answer
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### Why do loans drive the economy?

Someone was saying: "Why is credit so important? Because when a borrower receives credit (loan), he's able to increase spending. Spending drives the economy. This is because one person's spending is ...
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0 votes
2 answers
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### How do efficient credit markets allocate capital properly?

I've learned that efficient credit markets should theoretically allocate capital efficiently, which means that all possible investments should have the same marginal product of capital (assuming some ...
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0 votes
2 answers
266 views

### difference between demand for money and credit

As far as I understand in both cases we are seeking money that we don't have and would like to borrow. That being said what I find even more misleading is the fact that as a nominal interest rate ...
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0 votes
2 answers
730 views

### Why does the government need to control interest rates?

Context As far as I understand, economic cycles are mostly dependent on the amount of demand (which is influenced by money supply, which is in turn influenced by the availability of credit). Since ...
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2 votes
1 answer
106 views

### Does credit really help an economy?

I'm reading Ray Dalio's How the Economic Machine Works, and although I understand the role of credit in an economy, I don't understand whether credit actually adds any value to an economy. Ray says ...
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1 vote
1 answer
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### What is consumer debt and how could it make businesses vulnerable?

Consumer debt is the obligation to pay for the credit that the customers have used. But, how can tapping out more credits make business more vulnerable?
0 votes
1 answer
171 views

### Does Chile have a government owned Export Import bank like the US or India?

If not, what type of trade financing do Chilean exporters or importers get? Is it all from private banks and insurers?
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3 votes
1 answer
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### Was the aid in the Marshall Plan a loan?

In the aftermath of the Second World War the USA organised the Marshall plan for the post-war reconstruction of Europe. I take it this was actually a loan of some kind; on what kind of terms was the ...
6 votes
8 answers
3k views

### Would insurance plan be necessary if we had instant access to credit?

Assuming one could instantly have access to an loan to cover his recent loss/accident at an affordable interest, would it make sense to pay premium for an insurance plan? I was thinking that it would ...
3 votes
1 answer
9k views

### What is the Credit-to-GDP gap exactly?

I have been hearing a lot about this metric in relation to rising fears of a Chinese financial crisis. I am wondering, what exactly does this mean? I am told it refers to the difference between ...
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5 votes
1 answer
2k views

### Why did the stock of consumer loans held by commercial banks jump in March 2010?

The graph below refers to "Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks", from here. What happened in March 2010? The data come from the balance sheets of commercial ...
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3 votes
1 answer
1k views

### Free Data Source for Credit Spreads?

Credit spreads are a key economic indicator. They are the difference between yields on corporate and government debt. They are a measure of confidence in the private sector, they provide insight into ...
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### Does only enough money exist to pay the principal on all debts, and none for the interest or for anything else?

This is reported to be the testimony of Marriner Eccles, Governor of the Federal Reserve Board, before the House Committee on Banking and Currency, on September 30, 1941. Does this mean that only ...