Asymmetric Consumption Smoothing

Brian Baugh, Itzhak Ben-David, Hoonsuk Park and Jonathan Parker

No 25086, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Analyzing account-level data from an account aggregator, we find that households increase consumption when they receive (expected) tax refunds, as if they face liquidity constraints. However, these same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Even households carrying credit card debt smooth consumption when making payments, and even highly-liquid households spend out of refunds. This behavior is inconsistent with pure liquidity constraints or hand-to-mouth behavior and most consistent with a mental accounting life-cycle model.

JEL-codes: D12 E21 G4 H31 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-dge and nep-mac
Note: CF EFG ME
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Citations: View citations in EconPapers (4)

Published as Brian Baugh & Itzhak Ben-David & Hoonsuk Park & Jonathan A. Parker, 2021. "Asymmetric Consumption Smoothing," American Economic Review, American Economic Association, vol. 111(1), pages 192-230, January.

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