The Effect of Unconventional Fiscal Policy on Consumption –
New Evidence based on Transaction Data
joint with Winfried Koeniger, PDF
Abstract: We use novel transaction-level card expenditure data to estimate the effect of the temporary value-added tax (VAT) cut in Germany 2020. We find that the annualized growth rate of expenditures for durables increased by 6 percentage points (pp) during the tax cut, with a particularly strong increase of up to 11 pp for consumer electronics. The expenditure growth rate for semi-durables and non-durables did not change by and large. The estimates imply a consumption multiplier of 0.2 and an elasticity of fiscal revenues to a VAT rate reduction of two thirds.
Transactional Data on Consumption Expenditures for Germany and Austria
joint with Jonas Lehmann and Winfried Koeniger, PDF
Abstract: We analyze the novel transactional card expenditure data for Germany and Austria provided by Fable Data. We describe key features of the data in terms of the coverage of expenditure items, payment channels, and the distribution of expenditures across regions and time. We highlight strengths and limitations of the data by comparing them to more consolidated lower-frequency information from external data sources. We find very similar expenditure patterns in Germany and Austria. We illustrate the advantages of the granular, higher-frequency information across expenditure items and locations by analyzing how consumption expenditures evolved during the COVID-19 crisis and beyond.
Savings Behavior, Homeownership, and the Terms of Credit
joint with Lea Fricke
Abstract: We investigate the influence of the terms of credit on consumption, saving, and housing decisions of young households. To do so, we develop an incomplete-markets life-cycle model that features an endogenous borrowing price schedule. Incorporating a mortgage rate that increases with the loan-to-value ratio introduces a novel and strong savings incentive. Calibrating the model to German data, we find that our model with a flexible mortgage rate accurately replicates observed upfront savings and the age distribution of new homeowners. Comparisons with fixed-rate benchmarks point to the importance of incorporating such housing market realism and emphasize the impact of the terms of credit on upfront savings, housing choices, and investment dynamics. We identify differences in mortgage rates as a key source of heterogeneity in marginal propensities to consume non-durables.
The Winner Consumes It All
Abstract: I provide novel evidence on the consumption response to 29,000 prizes won in the United Kingdom's National Lottery ranging between £2 and £217,000 using transaction-level credit and debit card data. Exploiting the granularity of the data allows me to identify consumption responses at the daily level in a window around the days of prize refunds by comparing lottery winners to lottery participants who did not win on that day. My preliminary results imply a marginal propensity to spend of 56% on the day of the prize refund. I further decompose consumption responses by calendar time, expenditure categories and along the size distribution of prizes.