Does Saving Cause Borrowing?

74 Pages Posted: 28 Jun 2021 Last revised: 2 Jun 2023

See all articles by Paolina C. Medina

Paolina C. Medina

University of Houston

Michaela Pagel

Columbia University - Columbia Business School

Date Written: June 2021


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

Suggested Citation

Medina, Paolina C. and Pagel, Michaela, Does Saving Cause Borrowing? (June 2021). NBER Working Paper No. w28956, Available at SSRN:

Paolina C. Medina (Contact Author)

University of Houston ( email )

4750 Martin Luther King Blvd
Houston, TX 77204-60
United States

Michaela Pagel

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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