Forecasting charge-off rates with a panel Tobit model: the role of uncertainty

Sheng, Xin and Gupta, Rangan and Ji, Qiang (2021) Forecasting charge-off rates with a panel Tobit model: the role of uncertainty. Applied Economics Letters. ISSN 1466-4291

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Official URL: http://dx.doi.org/10.1080/13504851.2021.1898532

Abstract

Based on a large panel dataset of small commercial banks in the United States, this paper employs a dynamic panel Tobit model to analyse the role of uncertainty in forecasting charge-off rates on loans for credit card (CC) and residential real estate (RRE). When compared to other standard predictors, such as house prices and unemployment rates, we find that the effect of uncertainty changes on charge-off rates is more pronounced. Furthermore, it is evident that including heteroscedasticity in the model specification leads to more accurate forecasts.

Item Type: Journal Article
Keywords: Loan charge-offs, panel data, Tobit model, forecasting
Faculty: Faculty of Business & Law
SWORD Depositor: Symplectic User
Depositing User: Symplectic User
Date Deposited: 12 Apr 2021 14:07
Last Modified: 12 Apr 2021 14:07
URI: https://arro.anglia.ac.uk/id/eprint/706471

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