Borrowing constraints and credit demand: evidence for Uruguay

Abstract

This paper analyses the determinants of credit demand in the presence of borrowing constraints for Uruguayan economy. I model the determinants of debt level for Uruguayan households taking into account selection bias and endogeneity of household income and non-real estate assets. I found differences considering the type of debt that families face; mortgage and consumer debt. For instance, in average, income-to-debt elasticities are smaller than one for both type of debt. Additionally, consumer debt income elasticity is smaller compared to mortgage debt. Besides, in average age-to-debt semi-elasticity are negatives for any type of debt. The effect is larger in consumer debt compared to mortgage debt. However, variable age is not statistically significant in determining debt semi-elasticity. In addition, I find evidence of sample selection for any type of debt, but I do not find evidence of endogeneity for consumer debt, nor for mortgage debt