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Consumption response to temporary price shock: Evidence from Singapore's annual sale event

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  • Agarwal, Sumit
  • Koo, Kang Mo
  • Qian, Wenlan

Abstract

Exploiting debit card and credit card transactions of a large, representative sample of consumers from a leading bank in Singapore, we examine the consumption response to an anticipated, transitory price shock generated by the nation-wide annual sale event. Consumers significantly increase their spending during the sale event. More importantly, we find inter-temporal substitution where consumers spend less immediately before the event, and cross-categorical substitution behavior where consumers decrease spending in items unaffected by the sale event. However, consumers exhibit little substitution behavior when they use credit cards or when they are liquidity constrained, highlighting the importance of heterogeneity in assessing the aggregate impact of such stimulus programs.

Suggested Citation

  • Agarwal, Sumit & Koo, Kang Mo & Qian, Wenlan, 2022. "Consumption response to temporary price shock: Evidence from Singapore's annual sale event," Journal of Financial Intermediation, Elsevier, vol. 51(C).
  • Handle: RePEc:eee:jfinin:v:51:y:2022:i:c:s1042957322000195
    DOI: 10.1016/j.jfi.2022.100966
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    References listed on IDEAS

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    Cited by:

    1. Feng, Dawei & Zeng, Bing & Hu, Haoyu, 2023. "Access to credit cards and household labor participation: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PD).

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    More about this item

    Keywords

    Consumption; Great singapore sale; Credit card; Debit card; Household finance; Spending; Transitory shocks; Fiscal stimulus program;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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