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Consumption Response to Credit Expansions

Last registered on February 02, 2015

Pre-Trial

Trial Information

General Information

Title
Marginal propensity to consume out of liquidity
RCT ID
AEARCTR-0000608
Initial registration date
February 02, 2015

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
February 02, 2015, 2:53 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Last updated
February 02, 2015, 2:54 PM EST

Last updated is the most recent time when changes to the trial's registration were published.

Locations

Region

Primary Investigator

Affiliation
Washington University in St. Louis

Other Primary Investigator(s)

Additional Trial Information

Status
On going
Start date
2014-07-15
End date
2016-09-01
Secondary IDs
Abstract
This experiment uses exogenous variation in borrowing capacity to test competing models of inter temporal consumption behavior. I estimate the marginal propensity to consume (MPC) out of liquidity, the debt response to a change in borrowing capacity, using changes in credit card limits in a randomized controlled trial. I analyze the magnitude, duration and the heterogeneity of the MPC, as well as where the additional liquidity is spent. I test apart theories that predict a high MPC, such as myopia or liquidity constraints/precautionary savings.
External Link(s)

Registration Citation

Citation
Aydin, Deniz. 2015. "Marginal propensity to consume out of liquidity." AEA RCT Registry. February 02. https://doi.org/10.1257/rct.608-2.0
Former Citation
Aydin, Deniz. 2015. "Marginal propensity to consume out of liquidity." AEA RCT Registry. February 02. https://www.socialscienceregistry.org/trials/608/history/3505
Sponsors & Partners

Sponsors

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Experimental Details

Interventions

Intervention(s)
Intervention Start Date
2014-09-01
Intervention End Date
2016-09-01

Primary Outcomes

Primary Outcomes (end points)
The main outcome variable of interest is the response of credit card debt to a change in credit card limits. Credit card limit consists of revolving credit card balances, and balances in installments. Secondarily, we are interested in the consumption response in different sectors and other balance sheet effects, such as savings accounts.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
The assignment of credit line is done in three steps. First, the credit sales group pre-selects customers according to a set of profitability criteria. These criteria include the expected value added from limit increase, as well as macro prudential criteria imposed by the banking regulation authority preventing line increases, such as having pre-existing unpaid balances exceed half the card limit. The pre-selected individuals are then filtered by the bank’s risk group, according to a set of risk criteria. Finally, the remaining customers are pushed into the central bank’s credit limit clearing system to check if they are eligible for a credit limit extension, i.e. if their current limit is below four times their income. The randomization is done after the final step, therefore the control group consists of individuals that pass all criteria for being assigned an increased credit limit, but are not.
Experimental Design Details
Randomization Method
Randomization is done in STATA.
Randomization Unit
I group individuals on the basis of credit card utilization, defined as the ratio of end-of-month credit card balances to credit limit. I first estimate a distributed lag-model on the observational data for each utilization decile. The standard errors of the MPC estimates are higher for high utilization individuals, therefore I under-sample individuals that have a low credit card utilization, proportional to the standard errors.
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
54524 individuals
Sample size: planned number of observations
54524 individuals
Sample size (or number of clusters) by treatment arms
13438 control, 13416 treatment, 27670 treatment (undersampled)
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
Stanford
IRB Approval Date
2014-05-28
IRB Approval Number
29432

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials