Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/231308 
Authors: 
Year of Publication: 
2021
Publisher: 
ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
Abstract: 
I design a large-scale field experiment that constructs a randomized credit limit extension isolating selection, anticipation, wealth, and interest rate effects and study the impulse responses on spending, contract choice, and balance sheets. Participants borrow to spend 11 cents on the dollar in the quarter of the limit increase, with a cumulative difference of 28 cents by the third year. The effects extend to those far from the limit, those who had the new limits as available credit, and those with a meaningful buffer of liquid assets. Participants near their limits borrow and spend when limits are relaxed but put off spending and save out of constraints under the counterfactual when limits are tight. The findings provide strong support for a buffer-stock interpretation that emphasizes the importance of precautionary saving.
Subjects: 
consumption
credit
MPC
randomized field experiment
precautionary saving
JEL: 
D15
E21
E51
H31
Document Type: 
Working Paper

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