Credit card use after the final mortgage payment: does the magnitude of income shocks matter?

Arbeitspapier

We test the hypothesis that consumption smoothing occurs after large, but not small, expected future income shocks. Even though this hypothesis has often been discussed, formal evidence in support of it is rare. We use individual level, monthly, bank account data to examine how expected income shocks from final mortgage payments impact credit card consumption, and the repayment of credit card debt. Our data allows us to identify the exact magnitude and date of final mortgage payments, and also to exploit the random timing of these expected income shocks across individuals. Our results are consistent with the magnitude hypothesis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1142

Classification and Topics

• Classification: Wirtschaft
• Subject: credit card ; final mortgage payment ; income shocks ; monthly mortgage account ; Einkommenshypothese ; Kredittilgung ; Kreditkarte ; Mikrodaten ; Kanada

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Scholnick, Barry
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/153576
• Last update: 10.03.2025, 11:46 AM CET