José Manuel Liñares-Zegarra

Does debt affect health? Cross country evidence on the debt-health nexus

We investigate the relationship between aggregate household debt and aggregate health outcomes across 17 European countries over the period 1995 to 2012. Using a dataset of country-level standardized and objective measures of household debt, health outcomes and a rich set of control variables, we estimate an instrumental variable (GMM) model to address possible reverse causality concerns. We find that aggregate household debt affects health outcomes, and that this varies by the maturity of debt. Both short and medium-term debt has a positive effect on health outcomes. Long-term unsecured debt and mortgage debt are associated with poorer health outcomes. These findings are robust after controlling for alternative measures of health and debt. Overall, the results suggest that aggregate household debt is an important determinant of aggregate health outcomes across countries.

Feedback Loop Effects in Payment Card Markets: Empirical Evidence

While some studies have assumed that mature and well-established platforms do not exhibit feedback loop effects, other recent contributions have suggested that these effects may exist. Using a unique database that provides detailed information on both cardholder and merchant sides of the Spanish payment card market, we find empirical evidence of feedback loop effects. We also offer some evidence on the relative value that consumers (merchants) place on network characteristics such as the degree of merchant acceptance (cardholder adoption) and prices.

Credit Card Interest Rates and Risk: New Evidence from US Survey Data

This paper explores the risk-based pricing strategies of banks issuing credit cards in the United States. We employ a unique database which combines both the risk of cardholders (demand side) and terms and conditions of credit cards (supply side) offered in the US. Our results suggest that the annual percentage rates paid per unit of long-term risk decrease, implying that high-risk cardholders pay lower interest rates than their low-risk counterparts. This effect is pronounced for sub-prime cardholders. However, under stressed conditions, it seems that issuer banks have increased their interest rates to account for the high prevailing level of short-term risk observed in the market. Overall, our findings suggest that the risk-based pricing strategies employed by banks do not sort effectively cardholders in terms of risk. The non-price characteristics of credit cards (such as network affiliation, issuer brand and reward program) play an important role in complementing the risk-based strategies. WP No 12-001 4th Quarter 2012This study uses survey data and instrumental variables’ methods to assess whether in the USA the prices of credit cards (annual percentage rates, APRs) reflect the short- and long-term risks of cardholders (measured as unpaid credit card debt in the previous year, outstanding debt and Fair Issac Corporation score). We find a negative relationship between APRs and long-term risk. This effect is pronounced for sub-prime cardholders. This suggests that higher risk consumers shop around more intensively for credit cards offering the best terms and conditions. However, under stressed economic conditions, issuer banks increase APRs to account for short-term risk. Credit card characteristics, including network affiliation and issuer brand, play an important role in the pricing decisions of issuer banks.

Sticking it on plastic: credit card finance and small and medium-sized enterprises in the UK

ABSTRACT This paper investigates the role of credit card financing in UK small and medium-sized enterprises (SMEs) and how this varies by location and business orientation. Using a large-scale data set of UK SMEs, the results of a regression-based analysis suggest that firms located in peripheral geographical areas have greater usage of credit cards relative to counterparts located in ‘core’ locations. Innovative, growth- and export-oriented SMEs are also more inclined to use credit card financing. Moreover, SMEs that use credit cards as a form of improvised financial ‘bootstrapping’ are more likely to seek additional funding sources in future.

Can Debt Affect Your Health? Cross Country Evidence on the Debt-Health Nexus

We investigate the relationship between household debt and health outcomes for OECD countries over the period 1995 to 2012. Using a dataset of aggregated, standardized and objective measures of household debt and health outcomes, we estimate an instrumental variable (GMM) model in order to deal with endogeneity and reverse causality concerns between health and debt. We find that higher household debt is linked to poorer general health. The results are also significant in extreme cases where households are among the most financially distressed (over-indebted). We also find a link between debt maturity and health. Long-term household debt reduces life expectancy and increases premature mortality. The opposite holds for the relation between short and medium term debt and health. The results are robust after controlling for other socio-economic factors (including GDP per capita, government expenditure on health, percentage of rural population and alcohol consumption) that affect health.

Payment Card Interchange Fees: Assessing the Effectiveness of Antitrust Investigations and Regulation in Europe

This article provides empirical evidence on the impact of different interventions by public authorities on interchange fees (IFs) and cross-border multilateral interchange fees (MIFs) on both adoption and usage of payment cards in the EU-27. Controlling for social and financial characteristics across countries, we find no statistically significant effects on payment card adoption. However, we find mixed results on payment card usage after specific regulatory events: IFs regulation and investigations seem to have increased the number of transactions per card, mandatory reductions in IFs seem to have a negative impact on the value of transactions per card, and antitrust and regulatory scrutiny related to MIFs is found to increase the number of transactions per card but to reduce the value of transactions per POS. Additionally, the results show that specific regulatory and antitrust investigations related to both IFs and MIFs have statistically significant effects on card transactions as a proportion of all transactions made in a specific country.