Asymmetric Consumption Smoothing

50 Pages Posted: 24 Sep 2018

See all articles by Brian Baugh

Brian Baugh

University of Nebraska at Lincoln

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Hoonsuk Park

Nanyang Technological University (NTU)

Jonathan A. Parker

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: September 2018

Abstract

In data from an account aggregator, households increase consumption when they receive (expected) tax refunds, as if they are liquidity constrained. However, this behavior is not due to liquidity constraints or hand-to-mouth behavior. These same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Further, even households carrying credit card debt smooth consumption when making payments, and even high-liquidity households spend out of refunds. Thus the households we study follow a heuristic of spending out of increases in liquidity, while at the same time acting in anticipation of payments to maintain stable consumption.

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Suggested Citation

Baugh, Brian and Ben-David, Itzhak and Park, Hoonsuk and Parker, Jonathan A., Asymmetric Consumption Smoothing (September 2018). NBER Working Paper No. w25086. Available at SSRN: https://ssrn.com/abstract=3254080

Brian Baugh (Contact Author)

University of Nebraska at Lincoln ( email )

Lincoln, NE 68588
United States

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)

HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )

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HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/

Hoonsuk Park

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

Jonathan A. Parker

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA
United States
617-253-7218 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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