High‐Cost Credit and Consumption Smoothing. This paper had been previously circulated as “For Better and for even worse?

High‐Cost Credit and Consumption Smoothing. This paper had been previously circulated as “For Better and for even worse?

We thank the payday loans in Utah editor, Robert DeYoung, an referee that is anonymous Todd Gormley, Mark Jenkins, Paul Landefeld, Donald Morgan, Nick Roussanov, Luke Taylor, and Jeremy Tobacman for helpful feedback, in addition to seminar participants during the Wharton class, the GW/FRB/GFLEC Financial Literacy Seminar therefore the Consumer Expenditure Survey Microdata Workshop. I’m grateful to Jimmy Lee, Ryan Pfirrmann‐Powell, Geoffrey Paulin, Arcenis Rojas, yet others when you look at the Division regarding the Consumer Expenditure Survey in the Bureau of Labor Statistics for help accessing the Consumer that is confidential Expenditure files, and I also have always been grateful to Paul Amos of this Wharton GIS lab for help with GIS. The Jay H. Baker Retailing Center in the Wharton class offered large support that is financial the task before the writer’s work because of the Federal Reserve. Outcomes of Access to High‐Cost Credit Rating.” The analysis and conclusions expressed in this paper are the ones for the writer and don’t fundamentally mirror the views regarding the Board of Governors regarding the Federal Reserve System, its people, or its staff. This research ended up being carried out with limited usage of Bureau of Labor Statistics (BLS) information. The views right here don’t always mirror the views for the BLS.

Abstract

In this paper, I reveal that high‐cost credit helps households smooth usage after durations of short-term distress that is financial. After experiencing distress—that is, extreme climate events—I realize that access to high‐cost payday lending mitigates declines in general investing and nondurable items investing generally speaking. The outcome are especially concentrated among households with an increased tendency to utilize credit that is payday that have actually limited alternatives: low income households, households with lower than a college level, and households with lower levels of preserving. These outcomes highlight the consumption‐smoothing part that high‐cost credit plays for households with restricted use of other styles of credit.

Quantity of times cited based on CrossRef: 4

  • Kabir Dasgupta, Brenden J. Mason, the consequence of Interest Rate Caps on Bankruptcy: Synthetic Control proof from Present Payday Lending Bans, Journal of Banking & Finance, 10.1016/j.jbankfin.2020.105917, (105917), (2020).

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