Consumption Response to Temporary Price Shock: Evidence from Singapore's Annual Sale Event

60 Pages Posted: 14 Sep 2017 Last revised: 28 Mar 2022

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Kang Mo Koo

Yonsei University, Mirae Campus

Wenlan Qian

National University of Singapore - NUS Business School

Date Written: February 21, 2022

Abstract

Exploiting debit card and credit card transactions of a large, representative sample of consumers from a leading bank in Singapore, we examine the consumption response to an anticipated, transitory price shock generated by the nation-wide annual sale event. Consumers significantly increase their spending during the sale event. More importantly, we find inter-temporal substitution where consumers spend less immediately before the event, and cross-categorical substitution behavior where consumers decrease spending in items unaffected by the sale event. However, consumers exhibit little substitution behavior when they use credit cards or when they are liquidity constrained, highlighting the importance of heterogeneity in assessing the aggregate impact of such stimulus programs.

Keywords: Consumption, Great Singapore Sale, credit card, debit card, household finance, spending, transitory shocks, fiscal stimulus program

JEL Classification: D12, D91, P46

Suggested Citation

Agarwal, Sumit and Koo, Kang Mo and Qian, Wenlan, Consumption Response to Temporary Price Shock: Evidence from Singapore's Annual Sale Event (February 21, 2022). Journal of Financial Intermediation, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3035787 or http://dx.doi.org/10.2139/ssrn.3035787

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Kang Mo Koo (Contact Author)

Yonsei University, Mirae Campus ( email )

1 Yonseidae-gil
Wonju, Gangwon 26493
Korea, Republic of (South Korea)

Wenlan Qian

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

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