Essays on Credit Card Borrowing Behaviors
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Essay 1: Age-Period-Cohort Analysis of Credit Card BorrowingThe main purpose of this essay is to identify the existence of Age (A) C Period (P) and Cohort effects (C), and how taking Period/Cohorts effects into account modify previous understanding of consumersf credit card borrowing behavior over life cycle. Specially two related questions are examined: (1) what is the credit card borrowing pattern across age groups with and without cohort adjustment (2) What are the underlying factors accounting for consumersf revolving behavior (propensity to borrow and magnitude of debts) on credit card.In order to answer the above two questions, using SCF data from 1989 to 2007, aggregate level APC conventional models are used to identify the existence and pattern of A, P, and C effects. Age profile of credit card borrowing is studied using two-way fixed effects model. A cross-classified two-level mixed effects model is proposed to disentangle the variance of borrowing behavior between different cohorts and periods and to investigate the determinants of credit card borrowing behaviors. The analysis result shows that younger generations are more inclined to borrow money on their credit cards and to carry more outstanding balance than other generations. Consistent with previous researches, demographic variables are not significant once A,P, and C factors are included in the model. In addition, the residual variation between Cohort variables, or Period variables are significant after controlling for the individual-level explanatory variables, which provides the further evidence of the existence of Period and Cohort effects on householdsf credit card borrowing behavior.Essay 2: Credit card borrowing behavior of consumers ewho cannot payf and ewho do not want to payfWith the wide usage of credit card and the development of credit card market, new developed credit card borrowing behaviors and payment attitude present unfamiliar challenges to consumer finance researchers, card issuers and their risk strategies. One focus is the coexistence of credit cards debts with high interest and sizable low yield liquidity assets. Those revolvers on credit card carrying sizable liquidity assets are defined as revolvers ewho do not want to payf and those without liquidity assets are defined as revolvers ewho cannot payf. Based on a unique panel data from 2008 to 2009 in Taiwan credit market, a fixed effect model is proposed to differentiate the credit card borrowing behavior of revolvers ewho can not payf and ewho do not want to payf.