Wenlan Qian

Consumption and Debt Response to Unanticipated Income Shocks: Evidence from a Natural Experiment in Singapore

This paper uses a unique panel dataset of consumer financial transactions to study how consumers respond to an exogenous unanticipated income shock. Consumption rose significantly after the fiscal policy announcement: during the ten subsequent months, for each

Access to Home Equity and Consumption: Evidence from a Policy Experiment

1 received, consumers on average spent

The Hidden Peril: The Role of the Condo Loan Market in the Recent Financial Crisis

0.80. We find a strong announcement effect -- 19 percent of the response occurs during the first two-month announcement period via credit cards. Subsequently, consumers switched to debit cards after disbursement before finally increasing spending on credit cards in the later months. Consumers with low liquid assets or with low credit card limit experienced stronger consumption responses. (JEL D12, D14, E21)This paper uses a unique panel data set of consumer financial transactions to study how consumers respond to exogenous income shocks. Specifically, we study how their spending behavior on their credit card, debit card and bank checking account responds to a positive income shock. Our analysis is based on a difference-in-differences identification by exploiting the qualification criteria—foreigners do not qualify for the program. We find that consumption rose significantly subsequent to the fiscal policy announcement, for each dollar received, consumers on average spend 90 cents, during the ten months upon announcement. There was a moderate decrease in debt. We find a strong announcement effect -consumers increase spending on their credit cards during the two-month announcement period, but they switched to debit cards after disbursement, before finally increasing spending on the credit card in the later months. Consistently, credit card debt dropped in the first months after disbursement and reverted back to the original level. Finally, consumption response is heterogeneous across spending categories and across individuals. Consumption rose primarily in the non-food, discretionary category. The consumption response is driven by liquidity constrained consumers, and the spending response of the credit constrained consumers is dominated by that of the liquidity constrained consumers.

Tax Differential and Cross-Border Shopping: Evidence from Singapore

Using unique consumer financial transactions of more than 56,000 consumers, we study the consumption response to a housing policy experiment in Singapore that resulted in a decrease in access to home equity. Using difference-in-differences analysis, we find a significant negative consumption response to the policy shock. Moreover, the consumption response is concentrated in credit card spending and is stronger among individuals with limited access to credit market or with a high precautionary saving motive. These results suggest that a decrease in access to home equity reduces the role of housing as a self-insurance mechanism for consumption smoothing.

Disguised Corruption: Evidence from Consumer Credit in China

This article studies the condominium loan market, which experienced a 15-fold increase in origination and constituted 15% of the overall residential loan originations from 2001 to 2007. Condominium loan defaults grow at a faster rate than single-family (including subprime) loan defaults. Further analysis suggests that the greater default level and growth rate in later loan cohorts are consistent with the investor channel explanation: investor borrowers default more, especially when house prices start to decline. We also show that condo defaults have triggered more defaults of the same cohort subprime mortgages at the same location.

Consumption Response to Temporary Price Shock: Evidence from Singapore's Annual Sale Event

This paper uses a unique panel data set of consumer financial transactions to study if consumers living closer to the border are less likely to buy in the home country in comparison to consumers living further away from the border. We find that consumers living close to the border overall spend 2 percent less domestically, and 32 percent less in substitutable categories. For goods that cannot be purchased across the border (utilities and services) or for which distance is irrelevant (direct marketing) there is no difference in spending behavior.Higher sales tax or price in the home country relative to a neighboring country create a huge incentive for consumers living closer to the border to purchase goods in the neighboring country in comparison to consumers living further away from the border. Using a unique panel data set of consumer financial transactions, we find that consumers facing higher domestic sales tax and living close to the border overall spend 2 percent less domestically, and 32 percent less in substitutable categories. For goods that cannot be purchased across the border (utilities and services) or for which distance is irrelevant (direct marketing) there is no difference in spending behavior. Finally, we also look at store sales and find that domestic sales of stores near the border are lower.

Thy Neighbor's Misfortune: Peer Effect on Consumption

Abstract Using a comprehensive sample of credit card data from a leading Chinese bank, we show that government bureaucrats receive 16% higher credit lines than non-bureaucrats with similar income and demographics, but their accounts experience a significantly higher likelihood of delinquency and debt forgiveness. Regions associated with greater credit provision to bureaucrats open more branches and receive more deposits from the local government. After staggered corruption crackdowns of provincial-level political officials, the new credit cards originated to bureaucrats in exposed regions do not enjoy a credit line premium, and bureaucrats’ delinquency and reinstatement rates are similar to those of non-bureaucrats.

The Effectiveness of Housing Collateral Tightening Policy

Exploiting a novel panel dataset of consumer financial transactions in Singapore, we examine the consumption response to an anticipated, transitory price shock generated by the nation-wide annual sale event. Consistent with theory, we find inter-temporal substitution where consumers spend less immediately before the event, and cross-categorical substitution behavior where consumers decrease spending in items unaffected by the sale event. However, liquidity constrained consumers responded to the price change with significant spending increase and little substitution behavior. Moreover, consumers pay by credit card first and switch to debit card afterwards, further highlighting the role of liquidity in understanding the consumption response.

Competition of the Informed: Does the Presence of Short Sellers Affect Insider Selling?

We study the credit and debit card spending response of individuals whose neighbors living in the same building experience bankruptcy. We document that the neighbors’ monthly card consumption decreases by 3.4% over the one-year post-bankruptcy period — an annual decrease equivalent to 7% of monthly income. The absence of consumption response among individuals in immediately adjacent buildings provides validation of our identification. Consistent with a learning channel, the consumption response is more pronounced for consumers with greater peer awareness or financial sophistication, and is stronger in the non-conspicuous goods. Credit card debt and delinquency also decrease for the financially sophisticated consumers.

How Constraining Are Limits to Arbitrage

We propose a novel supply-side channel for the transmission of macroprudential policy. We exploit a unique policy experiment that tightens collateral requirements differentially across mortgage contract types, and document a composition change towards borrowers that have higher debt-to-income ratios and are more likely to become delinquent. This phenomenon results from the profit maximization motive of banks, which respond optimally to the excess funding liquidity, adjusting the margins that are unaffected by regulatory changes. Our results are important for the design of policy packages, and suggest that collateral tightening should be complemented with measures that target the balance sheet positions of borrowers directly.