Photo George Overton

George Overton

Doctorant(e)
  • Email
  • Tél. professionnel 0140977793
  • Bureau à Paris Nanterre (Bât. + num.) G602
  • Research group

      Macroéconomie Internationale, Banque et Econométrie Financière

2020-23 "Monetary Policy and Housing Loan Default"

Barbara Castillo Rico, George Overton

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Abstract
The most direct channel of transmission of monetary policy to households is the modification of ECB lending and deposit facilities rates. Outstanding borrowers with adjustable rate loans face affordability conditions changes with important consequences on their financial situation. In this paper, we study the impact of monetary policy changes on housing credit default over the period 2004-2015. We use an extensive panel of French housing loans to reconstruct amortization tables over the life of each loan and compute changes in quarterly payments due to monetary policy action, later using hazard models to map changes in interest rates to default. Importantly, our data set allows the assumption of the absence of strategic default our analysis, which isolates involuntary default in our estimates. First, we find that a 100 bp increase in quarterly payment induced by variations in the 3-month Euribor increases the probability of default by around 5\%. Second, we identify employment stability as a major insurance factor against rising policy rates during contractionary monetary policy action. Finally, we provide evidence about the existence of a self-selection of riskier borrower profiles into adjustable rate loans. The concern regarding payment size on adjustable-rate loans is of heightened importance in a monetary policy context characterized by uncertainty over the timing of a rate increase following a sustained period of low or negative rates.
Classification-JEL
R30, H81, E52
Mot(s) clé(s)
Housing loans, Monetary policy, Default
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2020-15 "Why do insurers fail? A comparison of life and non-life insolvencies using a new international database"

George Overton, Olivier de Bandt

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Abstract
Plantin & Rocher (2016) document how insurers often engage in risk-shifting years before the materialization of a failure. This paper empirically examines this claim by testing the mechanisms of insurance insolvency, using a first-of-its-kind international database assembled by the authors which merges data on balance sheet and income statements together with information on impairments over the last 30 years. Employing different fixed effects logistic specifications and parametric survival models, the paper presents evidence, on top of the role of profitability as a leading indicator of failures, of the intrinsic asymmetries between the life and non-life insurance sectors. In the life sector, asset mix is highly significant in predicting an impairment, while operating efficiency plays no role. In the non-life sector, the opposite proves true.
Classification-JEL
G22, G01, G11
Mot(s) clé(s)
Insurance, insolvency prediction, leading indicators, financial crises
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