How Forced Switches Reveal Switching Costs: Evidence from the Loan Market
Karolis Liaudinskas
Abstract:This article proposes a novel way to estimate consumer switching costs and uses Lithuanian credit register data and two bank closures to provide this estimate for the loan market. I show that when a distressed bank’s closure forced firms to switch, they started borrowing at lower interest rates instantly and permanently and that this drop revealed the lower bound of firms’ ex ante switching costs. A healthy bank’s closure showed no such effect. The article’s findings suggest that distressed banks hold up and o… Show more
Set email alert for when this publication receives citations?
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.