IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v104y2014i12p4205-30.html
   My bibliography  Save this article

Consumption and Debt Response to Unanticipated Income Shocks: Evidence from a Natural Experiment in Singapore

Author

Listed:
  • Sumit Agarwal
  • Wenlan Qian

Abstract

This paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock. Consumption rose significantly after the fiscal policy announcement: during the ten subsequent months, for each $1 received, consumers on average spent $0.80. We find a strong announcement effect -- 19 percent of the response occurs during the first two-month announcement period via credit cards. Subsequently, consumers switched to debit cards after disbursement before finally increasing spending on credit cards in the later months. Consumers with low liquid assets or with low credit card limit experienced stronger consumption responses. (JEL D12, D14, E21)

Suggested Citation

  • Sumit Agarwal & Wenlan Qian, 2014. "Consumption and Debt Response to Unanticipated Income Shocks: Evidence from a Natural Experiment in Singapore," American Economic Review, American Economic Association, vol. 104(12), pages 4205-4230, December.
    • Handle: RePEc:aea:aecrev:v:104:y:2014:i:12:p:4205-30
    Note: DOI: 10.1257/aer.104.12.4205
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.12.4205
    Download Restriction: no
    File URL: http://www.aeaweb.org/aer/app/10412/20130730_app.pdf
    Download Restriction: no
    File URL: http://www.aeaweb.org/aer/data/10412/20130730_data.zip
    Download Restriction: no
    File URL: http://www.aeaweb.org/aer/ds/10412/20130730_ds.zip
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:104:y:2014:i:12:p:4205-30. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.