Do we save for the bad times?

Borrowing on credit cards is expensive, yet people continue to accrue credit card debt. Michaela Pagel looks at evidence on credit card debt from a popular Icelandic financial aggregation app. Standard economic theory says that you will borrow more in bad times than in good, but her research shows that the opposite is true. This implies that periods of recession are deepened since people enter them already in debt and unwilling to increase borrowing and boost the economy.

a

A

Topics:  Financial markets

Tags:  credit card debt, household saving, Iceland

Associate Professor, Columbia Business School

Events

CEPR Policy Research