Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This paper uses a quasi‐natural experiment to identify the impact of interest rates on mortgage default. Using loan‐level panel data for Ireland, we deal with selection bias by exploiting the variation between two adjustable‐rate mortgages offered in the 2000s. We link interest rates to default directly through borrower installments. We find a strong, statistically significant, impact of interest rates on default; a 1% increase in installment is associated with a 5.8% increase in the likelihood of default. We also find evidence that negative equity amplifies the increase in default risk caused by higher interest rates.