Working paper

Abstract: In the U.S., the share of payments made "electronically"--with credit cards, debit cards, and direct payments--grew from 25 percent in 1995 to over 50 percent in 2002 (BIS, 2004). This paper frames this aggregate change in the context of individual behavior. Family level data indicate that the share of families using or holding these instruments also increased over the same period. The personal characteristics that predict use and holdings are relatively constant over time.

Abstract: To assess whether homeowners know their house values and mortgage terms, we compare the distributions of these variables in the household-reported 2001 Survey of Consumer Finances (SCF) to the distributions in lender-reported data. We also examine the share of SCF respondents who report not knowing these variables. We find that most homeowners appear to report their house values and broad mortgage terms reasonably accurately.

We examine the effects of collateralized borrowing in a realistically parameterized life-cycle portfolio choice problem. We provide basic intuition in a two-period model and then solve a multi-period model computationally. Our analysis provides insights into life-cycle portfolio choice relevant for researchers in macroeconomics and finance. In particular, we show that standard models with unlimited borrowing at the riskless rate dramatically overstate the gains to holding equity when compared with collateral-constrained models.

Abstract: The Jobs and Growth Tax Relief and Reconciliation Act of 2003 has been described as textbook fiscal stimulus. Using household survey data on the self-reported qualitative response to the tax cuts, we estimate that the boost to aggregate personal consumption expenditures from the child credit rebate and the reduction in withholdings raised the average level of real GDP in the second half of 2003 by 0.2 percent and by 0.3 percent in the first half of 2004.

This paper tests for the presence of age and gender discrimination in the loan underwriting process. We modify the tools used during the past exams to test for racial discrimination and apply them here to test for the presence of disparate treatment on the basis of age and gender. Using HMDA data along with data from 18 fair lending exams recently conducted by the OCC, between1996 – 2001, we find no evidence of systematic discrimination on the basis of age or gender. Further, the tools used and tested for in this analysis are now readily available for use in future fair lending exams.

Abstract: I test the credit-market effects of housing wealth shocks by estimating the consumption elasticity of house price shocks among households in different age quintiles. Younger households face faster expected income growth and hence would like to borrow more than older households. I estimate consumption elasticities from housing wealth by age quintile to be {4; 0; 3; 8; 3} percent. As predicted by theory, the youngest group has a higher elasticity of consumption than the next two age quintiles.

Abstract: Economists disagree whether the recent increase in credit card debt has been detrimental to U.S. households. However, many rely on a measure of revolving credit published by the Federal Reserve, which captures transactions in which a credit card is used because of its advantages over cash or a check. An increase in debt stemming from such convenience use likely would not signal greater financial vulnerabiltiy for households.

Abstract: The key feature of the modern U.S. personal bankruptcy law is to provide debtors a financial fresh start through debt discharge. The primary justification for the discharge policy is to preserve human capital by maintaining incentives for work. In this paper, we test this fresh start argument by providing the first estimate of the effect of personal bankruptcy filing on the labor supply using data from the Panel Study of Income Dynamics (PSID).

Abstract: Using a unique set of household level panel data, we estimate the effect of capital gains on saving by asset type, controlling for observable and unobservable household specific fixed effects. The results suggest that the decline in the personal saving rate since 1984 is largely due to the significant capital gains in corporate equities experienced over this period. Over five-year periods, the effect of capital gains in corporate equities on saving is substantially larger than the effect of capital gains in housing or other assets.

This paper investigates the determinants of holding different types of equities in the context of a 401(k) retirement plan. The decision of holding a given type of equity fund is related to investor characteristics and common effects.The results of this paper should be relevant for academics, in their effort to produce models that may explain or guide actual portfolio choices. The results of this paper should also be useful to policymakers, who may be concerned with the impact of a possible reform of the Social Security system on households’ finances and on financial markets.