John P. Caskey

Pawnbroking in America: The Economics of a Forgotten Credit Market

This paper surveys the role of pawnbroking in U.S. credit markets. Among the findings are: pawnshops provide very small secured loans to millions of low-income Americans excluded from bank and finance company credit. Most states regulate pawnshop finance charges, with the majority setting ceilings between 36 and 240 percent APR. Over the past century, pawnbroking has grown dramatically in the Southern and Central Mountain States, while shrinking in the Northeast. This article offers explanations for these trends as well as for the recent nationwide boom in the industry. Copyright 1991 by Ohio State University Press.

Bank Representation In Low-Income And Minority Urban Communities

The author of this article examines the empirical support for the propositions that bank branches are significantly underrepresented in low-income and minority urban communities and that the problem has worsened in recent years. He tests these propositions with data on bank branch locations from 1970 through 1989 in five cities. The data from two of the cities are consistent with the propositions, but the patterns in the data from the other three cities are either inconsistent or mixed.

The urban unbanked in Mexico and the United States

This paper examines the ways in which lower-income households obtain basic financial services in urban communities in Mexico and the United States. And it discusses the efforts that private sector and government organizations are making to lower the cost or improve the quality of those services. The paper summarizes available information on these issues and assesses the rationale and challenges facing the strategies that both countries are using to improve the financial services available to lower-income households,giving particular attention tounbankedhouseholds, meaning households that do not have deposit accounts with any regulated deposit-taking institution, and also to lower-income households in large urban areas. In comparing the experiences of the two countries, the paper reviews the extent to which lower-income households are unbanked, their use of non-bank financial services, and strategies for improving financial services to the unbanked. The underlying differences between the countriestypical household incomes-national income per capita in Mexico in 2002 was US

The Susan B. Anthony Dollar and the Theory of Coin/Note Substitutions

8,540, compared with

Payday Lending: New Research and the Big Question

35,060 in the United States (World Bank 2003)-may also influence the difference in percentage of unbanked-9.1 percent of families in the United States compared with 76.4 percent found in a recent study in Mexico City.

Debt, Price Flexibility and Aggregate Stability

This paper analyzes governments attempts to replace circulating notes with coins. It argues that because of network externalities in currency systems, a government cannot simply offer a new coin, such as the Susan B. Anthony dollar, to the public and expect it to circulate, even when the coin/note substitution would benefit the economy. For such a substitution to succeed, a government may need to force the adoption of the coin by withdrawing the competing bill from circulation. Copyright 1994 by Ohio State University Press.

The IMF and concerted lending in Latin American debt restructurings: a formal analysis

Payday lending is controversial. In the states that allow it, payday lenders make cash loans that are typically for

Macroeconomics and Credit Markets

500 or less that the borrower must repay or renew on his or her next payday. The finance charge for the loan is usually 15 to 20 percent of the amount advanced, so for a typical two-week loan the annual percentage interest rate is about 400 percent. In this article, the author briefly describes the payday lending business and explains why it presents challenging public policy issues. The heart of this article, however, surveys recent research that attempts to answer what the author calls the big question, one that is fundamental to the public policy dispute: Do payday lenders, on net, exacerbate or relieve customers financial difficulties?

Rising Debt in the Private Sector: A Cause for Concern?

In conventional macroeconomic thought, price flexibility stabilizes thc economy. The more quickly prices fall (or inflation decreases) in a demand-induced recession, the faster output returns to its full-employment level. An alternative tradition, however, suggests that price flexibility can be destabilizing. If a recession reduces expectations of Jitlzre prices, this can raise current real interest rates and dampen aggregate demand. In addition, as actual current prices fall in a recession, real debt burdens rise which can reduce aggregate demand due to financial distress or the response of capital markets. This paper presents simulations from a dynamic macroeconomic model designed to examine the empirical effects of price flexibility. Our results show that, for credible specifications and parameter values7 the destabilizing effects of greater price flexibility can be larger than the conventional stabilizing channels. Therefore, it is possible that greater price flexibility magnifies the severity of economic contractions initiated by negative demand shocks.

The Philadelphia Stock Exchange: Adapting To Survive In Changing Markets

Abstract This paper models the IMFs policy of making its participation in an adjustment program contingent on a commitment by banks to finance the associated debt restructuring. The analysis shows that this tactic pressures smaller banks, tempted not to participate in sovereign debt restructurings, to participate. However, it is also shown that the bank participation rate falls as required new lending rises. Furthermore, the incentive for banks to choose not to participate rises as the probability of a future default rises and as bank capital increases.