NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Asymmetric Consumption Smoothing

Brian Baugh, Itzhak Ben-David, Hoonsuk Park, Jonathan A. Parker

NBER Working Paper No. 25086
Issued in September 2018, Revised in July 2020
NBER Program(s):Corporate Finance, Economic Fluctuations and Growth, Monetary Economics

Analyzing account-level data from an account aggregator, we find that households increase consumption when they receive (expected) tax refunds, as if they face liquidity constraints. However, these same households smooth consumption when making payments in other years, primarily by transferring funds among liquid accounts. Even households carrying credit card debt smooth consumption when making payments, and even highly-liquid households spend out of refunds. This behavior is inconsistent with pure liquidity constraints or hand-to-mouth behavior and most consistent with a mental accounting life-cycle model.

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Document Object Identifier (DOI): 10.3386/w25086

 
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