We study optimal interest-rate policy in a New Keynesian model in which the economy can experience financial crises and the probability of a crisis depends on credit conditions. The optimal adjustment to interest rates in response to credit conditions is (very) small in the model calibrated to...

The consumer credit market -- Credit risk -- Incremental loan profitability -- The fundamentals of price response -- Estimating price response -- Pricing segmentation -- Optimizing prices -- Behavioral economics and credit pricing