The Macroeconomic Implications of Coholding

In the United States, 30% of households are coholders who simultaneously borrow on credit cards and hold liquid assets. This generates a rich distribution of gross wealth positions that underpins the distribution of net wealth often used to calibrate macroeconomic models. We show that, beyond their role in constructing net wealth, gross positions in liquid assets and liquid debt are important in determining how households consume, save, and repay debt in response to positive income shocks. We build a quantitative model that generates the coholding observed in the data and matches observed marginal propensities to consume, save, and repay debt. The model highlights that fiscal transfers are more effective in stimulating demand if targeted at households with low gross positions instead of low net liquid wealth, while debt relief is less effective overall in the short run but achieves large consumption gains in the long run.