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Credit card debt puzzle: Evidence from the euro area

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  • Pulina, Giuseppe

Abstract

This paper documents the simultaneous accumulation of liquid assets and credit card debt in euro area countries. Despite its significantly lower prevalence compared to the US, results underscore similarities in the fundamental role of credit constraints and preferences toward risk. Contrary to previous findings with US data, tertiary education does not appear to significantly mitigate this puzzling behavior in the euro area.

Suggested Citation

  • Pulina, Giuseppe, 2024. "Credit card debt puzzle: Evidence from the euro area," Economics Letters, Elsevier, vol. 236(C).
    • Handle: RePEc:eee:ecolet:v:236:y:2024:i:c:s0165176524000697
    DOI: 10.1016/j.econlet.2024.111586
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    References listed on IDEAS

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    1. Irina A. Telyukova, 2013. "Household Need for Liquidity and the Credit Card Debt Puzzle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(3), pages 1148-1177.
    2. David B. Gross & Nicholas S. Souleles, 2002. "Do Liquidity Constraints and Interest Rates Matter for Consumer Behavior? Evidence from Credit Card Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 149-185.
    3. Olga Gorbachev & María José Luengo-Prado, 2019. "The Credit Card Debt Puzzle: The Role of Preferences, Credit Access Risk, and Financial Literacy," The Review of Economics and Statistics, MIT Press, vol. 101(2), pages 294-309, May.
    4. David B. Gross, 2002. "An Empirical Analysis of Personal Bankruptcy and Delinquency," The Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 319-347, March.
    5. Carol C. Bertaut & Michael Haliassos & Michael Reiter, 2009. "Credit Card Debt Puzzles and Debt Revolvers for Self Control," Review of Finance, European Finance Association, vol. 13(4), pages 657-692.
    6. Jeppe Druedahl & Casper Nordal Jørgensen, 2018. "Precautionary borrowing and the credit card debt puzzle," Quantitative Economics, Econometric Society, vol. 9(2), pages 785-823, July.
    7. Gathergood, John & Weber, Jörg, 2014. "Self-control, financial literacy & the co-holding puzzle," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 455-469.
    8. Fulford, Scott L., 2015. "How important is variability in consumer credit limits?," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 42-63.
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    More about this item

    Keywords

    Household finance; Credit card puzzle; Credit constraints; Risk aversion; Precautionary motive;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles

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