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We examine the ability of the government to impact mortgage refinancing activity and spur consumption by focusing on the Home Affordable Refinance Program (HARP) that relaxed housing equity constraints by extending government credit guarantee on insufficiently collateralized refinanced mortgages. Difference-in-difference tests based on program eligibility criteria reveal a significant increase in refinancing activity by HARP. More than three million eligible borrowers with primarily fixed-rate mortgages refinanced under HARP, receiving an average reduction of 1.45 |$\%$| in interest rate ($3,000 in annual savings). Durable spending by borrowers increased significantly after refinancing. Regions more exposed to the program saw a relative increase in non-durable and durable consumer spending, a decline in foreclosure rates, and faster recovery in house prices. Competitive frictions in the refinancing market hampered the program's impact: the take-up rate and annual savings among those who refinanced were reduced by 10–20 |$\%$|⁠ , with amplified effects for the most indebted borrowers. [ABSTRACT FROM AUTHOR]

Making the purchase price fully salient to consumers has been shown to affect demand and equilibrium prices in various markets. Using a setting where part of the home acquisition price is in the form of nonsalient debt, we show this can happen in housing—a market where a typical household makes its largest acquisition. A regulation that made the debt and the total price salient for homebuyers eliminated a large mispricing caused by consumers' inattention to the debt before the regulation. An average homebuyer would lose about $13,300 by acquiring a dwelling with one-standard deviation ($51,000)-higher debt, but this is nearly eliminated after the regulation. To shed light on the underlying channels, we use administrative data and show that young, financially inexperienced, and first-time homebuyers used to overpay the most. The results are not driven by rational channels based on liquidity constraints and adverse selection. Our findings imply that making all-inclusive house price and mortgage features salient at the time of advertising the sale can help avoid unintentional borrowing. This paper was accepted by David Simchi-Levi, finance. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2021.4253. [ABSTRACT FROM AUTHOR]

Using transaction-level credit-card spending from a large U.S. financial institution, we show that disaggregated sales provide accurate and persistent signals of customer demand relevant to a firm's stock pricing. After controlling for earnings and sales surprises, one interquintile increase in the adjusted customer spending during a firm's fiscal quarter leads to a 1.5 percentage point increase in the 60-day post–earnings announcement cumulative abnormal return. The predictability concentrates in consumer-oriented firms, especially those relying more on indirect sales distribution channels. We also find a stronger return response to spending from high-FICO-score, high-liquidity, and loyal customers. The transmission speed of disaggregated sales information is slower than that of the earnings information, and small firms or firms far from their end customers exhibit a more delayed price response. Finally, the return implications of adjusted customer spending extend to firms along the production chain. This paper was accepted by Haoxiang Zhu, finance. [ABSTRACT FROM AUTHOR]

We show that consumers spend 15% more per day in the first week following the receipt of a credit card statement than in the days just prior to the statement. This increase in spending includes both an increase in the likelihood that they use the credit card in the first weeks following their statement and an increase in transaction amount on days they use the credit card. In contrast to the effect on credit card spending, debit card spending is unaffected by credit card statement issuance, suggesting that consumers are not simply switching among modes of payment. Our estimates are based on exogenous variation from bank-assigned statement dates. We propose and test several alternative explanations to this spending puzzle: optimization of the free float, salience effect of the credit card statement, mental accounting, liquidity constraints, and automatic payments. We find that the consumers most apt to spend early in the credit card cycle tend to be those who do not revolve balances and are not close to their credit limit. Thus, this paper documents a puzzle with mixed support for several alternative explanations. This paper was accepted by David Simchi-Levi, finance. [ABSTRACT FROM AUTHOR]

The global landscape has seen the advent of new technology in offering innovative financial services and products and reshaping the financial sector, namely FinTech. In this review, we discuss the literature on recent FinTech development and its interaction with both banks and consumers. We synthesize the insights it provides into two domains: credit supply and payment and clearing services. The rise of FinTech has introduced digital transformation of the "bricks‐and‐mortar" banking model and dramatically changed the way financial services are delivered. We also present several future questions and directions that are worthy of investigation for researchers and policy‐makers. [ABSTRACT FROM AUTHOR]

This paper exploits an administrative regulation in Singapore that allows individuals to withdraw between 10% and 30% of their pension savings at age 55. We find a large and highly significant increase in individuals' bank account balances within the first month of turning 55, which declines by about a third by the end of 12 months. Consumers use the increase in disposable income to pay down credit card debt. Liquidity constrained individuals are significantly more likely to increase their spending upon turning 55 than unconstrained individuals—nonetheless, the spending response of constrained individuals is concentrated on nondurable and nonvisible goods rather than visible goods. We also provide evidence that withdrawal behavior is responsive to the prices of durable goods such as cars. Consumers appear willing to forego much higher interest rates in their retirement accounts by leaving a sizeable portion of their withdrawn savings in a low-interest accruing bank account for at least a year after withdrawal. We show that, for some consumers, part of this behavior may be due to the desire to invest in the property market when housing returns are high. This paper was accepted by Gustavo Manso, finance. [ABSTRACT FROM AUTHOR]

Gender gap can arise due to various factors--socio-economic, culture, risk attitudes, and macro-economic circumstances. Using a unique dataset that merges motor vehicle events with bankruptcy outcomes and personal data from Singapore, this study finds significant evidence of a gender gap in personal bankruptcy risk. We show that women's odds of being involved in bankruptcy events are 28% of those of men after controlling for demographic variables, housing type, cultural and spatial fixed effects. Using motor vehicle accidents as an instrument, we confirm that the gender gap in bankruptcy risk is mainly driven by risk-taking behavior. The heterogeneity analyses show that culture also explains part of the difference. Chinese, Indian, and Malay women have differential bankruptcy rates in Singapore. [ABSTRACT FROM AUTHOR]

Refinancing a mortgage is often one of the most important financial decisions people make. Borrowers choose the interest rate differential at which to refinance, and when that differential is reached, they need to take the steps to refinance before rates change again. Using a simple closed-form solution approximation of the optimal refinancing rule and a unique panel data set including information from a large secondary market participant on refinancing, we find that approximately 57% of borrowers refinance suboptimally-50% choose the wrong rate, 17% wait too long to refinance, and 10% do both. Financially sophisticated borrowers make smaller mistakes, refinancing at rates closer to optimal and waiting less after mortgage rates reach their trigger rates. Evidence suggests borrowers learn from their refinancing experiences. This paper was accepted by Amit Seru, finance. [ABSTRACT FROM AUTHOR]

In this study we report findings about financial literacy and financial planning behavior based on a financial advisory program in India. We evaluate survey responses to three standard questions previously used to measure financial literacy. We then break down the data across particular demographic and socioeconomic groups and compare responses. Finally, we examine the investment behavior, liability choice, risk tolerance and insurance usage of program participants. We find that the vast majority of respondents appear to be financially literate based on their answers to questions concerning interest rates (numeracy), inflation, and risk/diversification. However, we do find variation across demographic and socioeconomic groups. We are also able to obtain additional information about the financial tendencies of the program participants (including risk tolerance, investment preferences, investment goals, etc.) and to relate those tendencies to financial literacy. [ABSTRACT FROM AUTHOR]

Analyzing unique data from multiple large-scale randomized marketing trials of preapproved credit card solicitations by a large financial institution, we find that consumers responding to the lender's inferior solicitation offers have poorer credit quality attributes. This finding supports the argument that riskier type borrowers are liquidity or credit constrained and, thus, have higher reservation loan interest rates. We also find a more severe deterioration ex post in the credit quality of the booked accounts of inferior offer types relative to superior offers. After controlling for a cardholder's observable risk attributes, demographic characteristics, and adverse economic shocks, we find that cardholders who responded to the inferior credit card offers are significantly more likely to default ex post. Our results provide evidence on the importance of adverse selection effects in the credit card market. [ABSTRACT FROM AUTHOR]

Many consumers make poor financial choices and older adults are particularly vulnerable to such errors. About half of the population between ages 80 and 89 either has dementia or a medical diagnosis of “cognitive impairment without dementia.” We study lifecycle patterns in financial mistakes using a proprietary database that measures ten different types of credit behavior. Financial mistakes include suboptimal use of credit card balance transfer offers, misestimation of the value of one’s house, and excess interest rate and fee payments. In a cross-section of prime borrowers, middle-aged adults make fewer financial mistakes than younger and older adults. We conclude that financial mistakes follow a U-shaped pattern, with the cost-minimizing performance occurring around age 53. We analyze regulatory regimes that may help individuals avoid making financial mistakes. Some of these regimes are designed to address the particular challenges faced by older adults, but much of our discussion is relevant for all vulnerable populations. We discuss disclosure, nudges, financial driving licenses, advanced directives, fiduciaries, asset safe harbors, ex-post and ex-ante regulatory oversight. Finally, we pose seven questions for future research on cognitive limitations and associated policy responses., Economics