Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey
Using account-level credit card data from a large Turkish bank, we study the impact of a unique credit card policy that increases minimum payment on consumption and debt repayment. We show that the policy reduces credit card spending and debt, boosts existing debt repayment, and reduces credit card...
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Institutional Knowledge at Singapore Management University
2023
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sg-smu-ink.lkcsb_research-81922023-05-19T00:28:12Z Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey AGARWAL, Sumit HADZIC, Muris SONG, Changcheng YILDIRAY, Yildirim Using account-level credit card data from a large Turkish bank, we study the impact of a unique credit card policy that increases minimum payment on consumption and debt repayment. We show that the policy reduces credit card spending and debt, boosts existing debt repayment, and reduces credit card delinquency. The credit card debt of affected consumers falls on average by 50% two years into the policy’s implementation. An increase in minimum payment has a stronger effect than does a decrease of a similar magnitude. We build a benchmark life cycle model with soft liquidity constraint to explain the reduction in credit card spending. 2023-04-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/7193 info:doi/10.1093/rfs/hhad024 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8192/viewcontent/SSRN_id2569584.pdf https://ink.library.smu.edu.sg/context/lkcsb_research/article/8192/filename/0/type/additional/viewcontent/hhad024_supplementary_data.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University credit card policy minimum payment consumption debt repayment credit card spending credit card debt delinquency Turkish bank life cycle model liquidity constraint Economic Policy Finance Finance and Financial Management |
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credit card policy minimum payment consumption debt repayment credit card spending credit card debt delinquency Turkish bank life cycle model liquidity constraint Economic Policy Finance Finance and Financial Management |
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credit card policy minimum payment consumption debt repayment credit card spending credit card debt delinquency Turkish bank life cycle model liquidity constraint Economic Policy Finance Finance and Financial Management AGARWAL, Sumit HADZIC, Muris SONG, Changcheng YILDIRAY, Yildirim Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey |
description |
Using account-level credit card data from a large Turkish bank, we study the impact of a unique credit card policy that increases minimum payment on consumption and debt repayment. We show that the policy reduces credit card spending and debt, boosts existing debt repayment, and reduces credit card delinquency. The credit card debt of affected consumers falls on average by 50% two years into the policy’s implementation. An increase in minimum payment has a stronger effect than does a decrease of a similar magnitude. We build a benchmark life cycle model with soft liquidity constraint to explain the reduction in credit card spending. |
format |
text |
author |
AGARWAL, Sumit HADZIC, Muris SONG, Changcheng YILDIRAY, Yildirim |
author_facet |
AGARWAL, Sumit HADZIC, Muris SONG, Changcheng YILDIRAY, Yildirim |
author_sort |
AGARWAL, Sumit |
title |
Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey |
title_short |
Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey |
title_full |
Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey |
title_fullStr |
Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey |
title_full_unstemmed |
Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey |
title_sort |
liquidity constraints, consumption, and debt repayment: evidence from macroprudential policy in turkey |
publisher |
Institutional Knowledge at Singapore Management University |
publishDate |
2023 |
url |
https://ink.library.smu.edu.sg/lkcsb_research/7193 https://ink.library.smu.edu.sg/context/lkcsb_research/article/8192/viewcontent/SSRN_id2569584.pdf https://ink.library.smu.edu.sg/context/lkcsb_research/article/8192/filename/0/type/additional/viewcontent/hhad024_supplementary_data.pdf |
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1770576537248071680 |