RESEARCH
Working Papers
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Time Variation in Lifecycle Consumption and Income, with Yunus Aksoy and Henrique Basso, Banco de Espana, Working Papers series, Latest Version.
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Are US life cycle consumption profiles stable through time? Our evidence reveals they are not. Allowing for age effects to be time-varying and netting out the contribution of time and cohort effects, we find that older households have consistently become worse off relative to younger households. The traditional model that pools information across ages to identify each contribution biases the estimated age, time, and cohort effects. Finally, a changing pattern of consumption profiles emerges when combining time-varying age and cohort effects; in recent years, as baby boomers grow older, consumption no longer peaks in the years preceding retirement.
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The Credit Card Debt Puzzle: New Facts and Theory. Paper under revision.
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This paper revisits the co-holding puzzle; simultaneously holding liquid assets and credit card debt. It finds that while current explanations in the literature are successful in explaining much of the puzzle, a non trivial portion of co-holders are overlooked. Specifically, those with high
levels of liquid assets relative to credit card debt. I show the literature both understates and overstates the scale of co-holding. This paper first suggests a new approach for quantifying the degree of co-holding. It also discusses a non- liquidity based explanation for these more extreme co-holders. I suggest that consumers get utility from money, per se. Credit cards necessarily separate consumption and payment and over an option to defer payment. When binding constraints are not an issue, there can be utility gains from holding money enabled by the payment structure of credit cards.
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Work in Progress
Work in Progress
An Experiment in Buy Now Pay Later: Liquidity Constraints or Preferences for liquidity?, with Emanuela Sciubba, Birkbeck, University of London.
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Buy Now Pay Later (BNPL) is a relatively new, rapidly growing, payment technology. To give some idea of market size, in 2021 the number of BNPL users in the US was around one fifth of credit card users, accounting for $214 bn of sales. The market is forecast to grow to $834bn by 2028. Empirical evidence shows that consumers spend between 30% and 50% more after adopting BNPL, and that consumers use BNPL even when there is no apparent liquidity need. Consumers who need to smooth consumption can benefit from BNPL - it is cheaper than credit card borrowing. However, relatively little is known about why consumers defer payment, and spend without liquidity need, and how this may affect financial stability. We propose a novel experiment which separates liquidity need from deferring payment. This work will contribute to understanding this empirically observed, but poorly understood, aspect of BNPL.