A Model of Money and Credit, with Application to the Credit Card Debt Puzzle

Irina A. Telyukova () and Randall Wright ()

No 45, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: Many individuals simultaneously have significant credit card debt and money in the bank. The so-called credit card debt puzzle is, given high interest rates on credit cards and low interest rates on bank accounts, why not pay down this debt? Economists have gone to some lengths to explain this. As an alternative, we present a natural extension of the standard model in monetary economics to incorporate consumer debt, which we think is interesting in its own right, and which shows that the coexistence of debt and money in the bank is no puzzle

Keywords: Money; credit; monetary search models; credit card debt puzzle (search for similar items in EconPapers)
JEL-codes: E44 E51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-mon
Date: 2006-12-03
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Related works:
Working Paper: A model of money and credit, with application to the credit card debt puzzle (2007)
Journal Article: A Model of Money and Credit, with Application to the Credit Card Debt Puzzle (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:red:sed006:45

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