Does Saving Cause Borrowing? / Paolina C. Medina, Michaela Pagel.

Format:

Book

Author/Creator:

Medina, Paolina C.

Contributor:

National Bureau of Economic Research.

Pagel, Michaela.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28956.

NBER working paper series no. w28956

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We analyze an experiment involving 3.1 million bank customers who were encouraged to save through SMS messages. We first theoretically show that by examining their spending, saving, and borrowing responses we can distinguish between the leading explanations for coholding liquid savings and credit card debt. Using a machine learning algorithm, we then predict individual-level treatment effects and find that the most responsive individuals reduce spending and increase their savings by 5.1% (225 USD PPP per month), while their credit card debt remains unchanged. We argue that these joint findings suggest people co-hold because they mentally separate savings and debt accounts

Notes:

Print version record

June 2021.