Publication Type
Journal Article
Version
submittedVersion
Publication Date
4-2023
Abstract
Using account-level credit card data from a large Turkish bank, we study the impact of a unique credit card policy that increases minimum payment on consumption and debt repayment. We show that the policy reduces credit card spending and debt, boosts existing debt repayment, and reduces credit card delinquency. The credit card debt of affected consumers falls on average by 50% two years into the policy’s implementation. An increase in minimum payment has a stronger effect than does a decrease of a similar magnitude. We build a benchmark life cycle model with soft liquidity constraint to explain the reduction in credit card spending.
Keywords
credit card policy, minimum payment, consumption, debt repayment, credit card spending, credit card debt, delinquency, Turkish bank, life cycle model, liquidity constraint
Discipline
Economic Policy | Finance | Finance and Financial Management
Research Areas
Finance
Publication
Review of Financial Studies
ISSN
0893-9454
Identifier
10.1093/rfs/hhad024
Publisher
Oxford University Press
Citation
AGARWAL, Sumit; HADZIC, Muris; SONG, Changcheng; and YILDIRAY, Yildirim.
Liquidity constraints, consumption, and debt repayment: Evidence from macroprudential policy in Turkey. (2023). Review of Financial Studies.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7193
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Appendix
Additional URL
https://doi.org/10.1093/rfs/hhad024