as intent-to-treat (ITT) effects. That is, the treatment effect coefficients measure the effect of receiving a forbearance offer, rather than the effect of accepting the offer.

# **3.5.1 Loan repayment**

We begin by examining the effect of debt forbearance offers on loan repayment. As reflected in our survey of beliefs about debt relief in the population, reported in Section 2, there is widespread concern that granting repayment flexibility will create moral hazard in loan repayment by damaging the reputation of the lender or generating expectations of future relief. We test this hypothesis by examining whether receiving a debt forbearance offer reduces the likelihood that borrowers repay their loans fully and on time. In addition, we test whether the repayment response differs when the repayment moratorium is framed as an initiative of the lender or the regulator. Intuitively, if granting repayment flexibility during a crisis damages the reputation of the lender or generates expectations of lenient credit enforcement in the future, one would expect this effect to be _less_ pronounced if forbearance is presented as an initiative of the regulator rather than the lender.

Table 2, reports the results. We find that none of the forbearance offers extended as part of our experiment had a negative impact on loan repayment. We find no impact of forbearance offers on loan repayment when the offer is framed as an initiative of the regulator (b=0.003, s.e.=0.015). By contrast, we find that forbearance offers _improve_ loan repayment when the offer is presented as an initiative of the lender. The likelihood of loan default is 4 percentage points (6.9 percent) lower in the relationship offer treatment condition (b=0.041, s.e.=0.015) and the difference between the two offers is statistically significant at the 5 percent level (b=0.037, s.e.=0.015).

# **3.5.2 Borrower beliefs**

In Table 3, we turn to the effect of forbearance on borrower expectations. The dependent variables in the table are responses to a survey designed to test for expectations of future forbearance and lenient debt enforcement, the two principal channels through which one would expect debt moratoria to generate moral hazard. We show that, consistent with the absence of moral hazard in response to forbearance offers, repayment deferrals have no effect on borrower expectations.

In Table 3, columns (1) and (2), we first report treatment effects of debt moratorium offers on expectations of future forbearance, elicited through an incentivized survey exercise as described in Section 3.4. The point estimates are negative for both the relationship and regulator offers, suggesting that borrowers believe that receiving a debt forbearance offer in fact makes it slightly _less_ likely to be offered repayment flexibility in the future from either the government or a commercial bank. In Table 3, column (3), we report treatment effects on expectations of lenient credit enforcement, using responses from a non-incentivized elicitation exercise. The point estimates are positive but close to zero, especially for the relationship offer which one would expect to have the largest impact on expectations of lenient enforcement (b=0.049 s.e.=0.221). Taken together, the results indicate that receiving a debt forbearance offer does not lead borrowers to expect additional forbearance or more lenient credit enforcement in the future. This is consistent with the absence of a negative effect of forbearance offers 15