A Model of Money and Credit, with Application to the Credit Card Debt Puzzle

Preprint
Publisher Website
Google Scholar
  • 1 January 2006
    • preprint
      • Published in RePEc
Abstract
Many individuals simultaneously have significant credit card debt and money in the bank. The so-called credit card debt puzzle is, given high interest rates on credit cards and low interest rates on bank accounts, why not pay down this debt? Economists have gone to some lengths to explain this. As an alternative, we present a natural extension of the standard model in monetary economics to incorporate consumer debt, which we think is interesting in its own right, and which shows that the coexistence of debt and money in the bank is no puzzle

This publication has 0 references indexed in Scilit: