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 editor, Robert DeYoung, an anonymous referee, 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 in addition to Consumer Expenditure Survey Microdata Workshop. I will be grateful to Jimmy Lee, Ryan Pfirrmann‐Powell, Geoffrey Paulin, Arcenis Rojas, as well as others into the Division for the Consumer Expenditure Survey during the Bureau of Labor Statistics for support accessing the confidential Consumer Expenditure Survey 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 substantial monetary help for the task before the writer’s work with all the Federal Reserve. Aftereffects of Use Of High‐Cost Credit Rating.” The analysis and conclusions expressed in this paper are the ones regarding the writer and never always mirror the views regarding the Board of Governors associated with the online payday loans Wyoming Federal Reserve System, its people, or its staff. This research had been carried out with limited usage of Bureau of Labor Statistics (BLS) information. The views right here never fundamentally mirror the views associated with BLS.

Abstract

In this paper, We show that high‐cost credit helps households smooth usage after durations of short-term economic stress. After experiencing distress—that is, extreme climate events—I realize that access to high‐cost payday lending mitigates declines in general investing and nondurable goods investing generally speaking. The outcomes are especially concentrated among households with a greater tendency to make use of credit that is payday that have actually restricted alternatives: low income households, households with not as much as a college level, and households with lower levels of preserving. These outcomes highlight the consumption‐smoothing role that high‐cost credit plays for households with restricted access to other kinds of credit.

Amount of times cited based on CrossRef: 4

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

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