CONSUMPTION SMOOTHING AFTER THE FINAL MORTGAGE PAYMENT: TESTING THE MAGNITUDE HYPOTHESIS

• 成果类型: Article
• 署名作者: Scholnick, Barry
• 署名单位: University of Alberta
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/REST_a_00313
• 发表日期: 2013-10
• 页码: 1444-1449
• 关键词: anticipated income changes; household consumption; predictable changes

摘要

We examine whether the magnitude of an anticipated income change affects consumption smoothing (the magnitude hypothesis). Although this hypothesis has been discussed for fifty years, we are one of the first to provide formal statistical evidence to support it. We consider the natural experiment of an individual's final mortgage payment, an anticipated income change, and examine how it affects credit card expenditure. We can identify causality because the dates of final mortgage payments across individuals are uncorrelated with unobserved determinants of consumption. Using an event study methodology, we provide evidence to support the magnitude hypothesis.