Using detailed micro data, we document that households often use "stimulus" checks to pay down debt, especially those with low net wealth-to-income ratios. To rationalize these patterns, we introduce a borrowing price schedule into an otherwise standard incomplete markets model. Because interest...

Using detailed micro data, we document that households often use "stimulus" checks to pay down debt, especially those with low net wealth-to-income ratios. To rationalize these patterns, we introduce a borrowing price schedule into an otherwise standard incomplete markets model. Because interest...

This paper studies how and why consumers respond to unexpected, transitory income shocks. In a randomized control trial, I elicit marginal propensities to consume (MPC) out of different hypothetical income shock scenarios, varying the payment mode, the shock size, and the source of income. The...

Using detailed micro data, we document that households often use “stimulus” checks to pay down debt, especially those with low net wealth-to-income ratios. To rationalize these patterns, we introduce a borrowing price schedule into an otherwise standard incomplete markets model. Because...