Consumption, Credit, and the Missing Young

Abstract

There are more young adults today with either no credit history or insufficient credit history to be scored by one of the major credit bureaus than there were before the Great Recession-a reality that is likely an unintended outcome of the CARD Act of 2009. In regressions that include a rich set of controls, this paper shows that measures of young adults missing from credit bureau data act as a drag on state-level consumption growth. This finding seems to be driven by young individuals from more disadvantaged backgrounds having less access to credit since the act went into effect.

The Housing Supply Channel of Monetary Policy

“…First, we find significant heterogeneity in the transmission of an aggregate US contractionary monetary policy shock to the US states. The heterogeneity is particularly large among housing market variables, supporting recent findings in the literature (Fischer et al 2021, Aastveit and Anundsen 2022, Cooper et al 2022, Corsetti et al 2022, Koeniger et al 2022, Aastveit et al 2023. Moreover, as homeownership costs increase due to the tightening of monetary policy, we find that house prices fall while rent prices increase in most states, suggesting a reallocation of demand from the owner-occupied market to the rental market Duarte 2019, 2022).…”

“…In particular, differences in housing supply elasticities-how supply responds to demand-driven house price changes-imply that house prices in inelastic areas are more responsive to expansionary monetary policy shocks as builders face tighter geographical and regulatory constraints to expand supply (Fischer et al 2021, Aastveit and Anundsen 2022, Cooper et al 2022, Aastveit et al 2023). 2 There is also recent evidence that the responsiveness of house prices to monetary policy may have increased over time in light of declining supply elasticities (Herkenhoff et al 2018, Albuquerque et al 2020, Aastveit et al 2023.…”

“…Our main contribution is threefold. First, we trace out the impact of monetary policy not only on regional house prices-as investigated in the related literature (Fratantoni and Schuh 2003, Fischer et al 2021, Aastveit and Anundsen 2022, Cooper et al 2022, Aastveit et al 2023)-but also on the real economy and on financial variables. Second, we place the focus on differences in housing supply constraints across states for the transmission of (contractionary) monetary policy shocks.…”

Job Loss, Credit Card Loans, and the College-persistence Decision of US Working Students

“…Following the series of regulation changes, the number of credit card accounts and transactions declined across all consumers (Consumer Financial Protection Bureau, 2013;Lux and Greene, 2016;Jambulapati and Stavins, 2014;Jiang and Sánchez, 2016). The decline was particularly pronounced among young adults (Debbaut, Ghent, and Kudlyak, 2016;Consumer Financial Protection Bureau, 2013;Cooper, Gorbachev, and Luengo-Prado, 2022). Based on data from the Credit Card Practices Inquiry (CCPI), a survey of issuers that represents about 80 percent of 2 Method…”

“…Coincidentally, during the same period, credit supply to college students through credit card loans plummeted following the passage of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, which, in addition to other provisions, imposed tight restrictions on credit extension to individuals younger than 21 or older but enrolled in college. The act, while impacting all consumers, disproportionately limited credit supply to young adults (Debbaut, Ghent, and Kudlyak, 2016;Consumer Financial Protection Bureau, 2013) to the extent that it led to a moderate decline in US consumption growth in the post-recession era (Cooper, Gorbachev, and Luengo-Prado, 2022). Unlike government student loans, which follow a fixed application timeline, credit card loans are versatile, allowing students discretion over when and how much credit to use according to their current budget situation.…”