Accounting Applications White Papers
Consumer Response to Changes in Credit Supply: Evidence from Credit Card Data
Overview This paper utilizes a unique new data set on credit card accounts to analyze how people respond to changes in credit supply. The data consist of a panel of several hundred thousand individual credit card accounts followed monthly for 24-36 months, from several different card issuers, with associated credit bureau data. We estimate the dynamic effects of changes in the credit limit and in interest rates, and consider the ability of different models of consumption and saving to rationalize these effects. Credit card data is an ideal place to look for the effects of credit supply. First, credit cards play an increasingly important role in consumer finances. About 20% of aggregate personal consumption is already purchased using credit cards and with the growth of e-commerce that fraction is likely to grow. Moreover, for most households credit cards represent the leading source of unsecured credit. The amount of card debt is surprisingly large.
| Publisher | University of Pennsylvania | File Format | PDF, requires Acrobat Rdr 5 |
|---|---|---|---|
| Date Published | February 2000 | Downloads | 32 |
| Format | White Papers | ||
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