The novel bunching approach was used to obtain interest rate (semi)elasticities to loan demand after the implementation of a social program by a Mexican development bank. The implementation of this program introduced a notch in the budget set of the customers of such institution. Using a large sample of the loans granted by this development bank, bunching was clearly evident at the left vicinity of the program’s borrowing limit, making it possible to retrieve reliable behavioural responses of the development bank customers and thereafter, the interest rate semi-elasticities of loan demand were estimated. This semi-elasticities were large in magnitude, ranging from -10.61 to -24.80. The present work is informative and of interest of economic agents such as central, commercial and development banks, as well as ministries of finance and tax authorities, especially in countries with similar economic conditions to Mexico, since strong behavioural responses were observed after a change in the interest rate.

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Gerritsen, A.A.F.
hdl.handle.net/2105/46925
Business Economics
Erasmus School of Economics

Gonzalez Coppe, L.G. (2019, February 21). Interest Rate Elasticity of Loan Demand: Evidence of a Big Notch in the Mexican Development Banking Sector. Business Economics. Retrieved from http://hdl.handle.net/2105/46925