Does Saving Cause Borrowing? Implications for the Co-Holding Puzzle

Paolina C. Medina and Michaela Pagel

No 28956, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using an experiment in which 3.1 million bank customers were encouraged to save, we explore the mechanisms behind co-holding liquid savings and credit card debt. Theoretically, we first show that the joint responses of spending, saving, and borrowing to the nudge differ for different economic models of co-holding. Using machine learning techniques, we then find that the most responsive individuals reduce spending and increase their savings by 4.9% (206 USD PPP per month) while their credit card debt remains unchanged. For them, the marginal responses to the nudge are consistent with our model of co-holding for the purpose of self- or partner control.

JEL-codes: D14 G5 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-big, nep-cwa and nep-exp
Note: EFG
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