The Finance Brown Bag Seminar is held by the Institute for Finance, Banking and Insurance (WU Vienna) and the Vienna Graduate School of Finance (VGSF). It serves as a presentation platform for PhD students, faculty members, and visitors. An overview of BBS on the website of the Institute for Finance, Banking and Insurance.
December 16th, 2019, 12:00-13:00, D4.4.008
Thomas Rauter, The University of Chicago Booth School of Business
Title: "Perceived Precautionary Savings Motives: Evidence from FinTech"
We study the consumption response to the provision of credit lines to individuals that previously did not have access to credit combined with the possibility to elicit directly a large set of preferences, beliefs, and motives. As expected, users react to the availability of credit by increasing their spending permanently and reallocating consumption from non-discretionary to discretionary goods and services. Surprisingly, though, liquid users react more than others and this pattern is a robust feature of the data. Moreover, liquid users lower their savings rate, but do not tap into negative deposits. The credit line seems to act as a form of insurance against future negative shocks and its mere presence makes users spend their existing liquidity without accumulating any debt. By eliciting preferences, beliefs, and motives directly, we show these results are not fully consistent with models of financial constraints, buffer stock models with and without durables, present-bias preferences, uncertainty about future income, bequest motives, or the canonical life-cycle permanent income model. We label this channel the perceived precautionary savings channel, because liquid households behave as if they faced strong precautionary savings motives even though no observables suggest they should based on standard theoretical models.