BibTeX
@MISC{Zinman061household,
author = {Jonathan Zinman},
title = {1 Household Borrowing High and Lending Low Under No-Arbitrage},
year = {2006}
}
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Abstract
U.S. households often borrow high on credit cards while lending low in bank accounts. This behavior does not violate no-arbitrage, or require psychological explanations, because credit cards and demand deposits are different assets. The latter are significantly more liquid and hence have implicit value. In principle then BHLL is not a puzzle per se for neoclassical models. In practice BHLL might still cast some doubt on the descriptive power of traditional rationality. But simple calculations show that costly BHLL is not prevalent, particularly after one accounts for the implicit value of liquid assets. The few households who do incur substantial BHLL costs have relatively high income and education levels.
Keyphrases
lending low household borrowing high implicit value credit card u.s. household costly bhll descriptive power bank account neoclassical model practice bhll different asset simple calculation demand deposit high income psychological explanation substantial bhll cost liquid asset traditional rationality education level
