How do non-assumable fixed-rate mortgages affect the transmission of interest rates into house prices? Higher rates increase the value of existing fixed-rate debt, creating an asymmetry between buyers and existing owners. We use administrative data to study the effect of this asymmetry on existing-home prices and sales during the 2021–23 tightening cycle. Using unexpected long-term Treasury rate increases, we find that existing owners value low-rate mortgages: lower fixed rates reduce sales, discourage moves from owning to renting, and increase existing owners' willingness to accept. This causes higher price growth in local housing markets where existing mortgages become more valuable during tightening. For variation in the local mortgage distribution, we develop new instruments based on family size shocks that cause moves at times with different long-term rates. Our estimates imply that eliminating the value of existing fixed-rate mortgages would reverse 30% of 2021–23 house price growth. We estimate a structural model of dynamic housing demand to measure the net price effect of higher rates, which both increase the value of existing fixed-rate debt and discourage homeownership. Existing models without fixed-rate mortgages predict a 20–37% price decline due to 2021–23 tightening. We predict a 4% decrease. Fixed-rate mortgages thus attenuate negative price effects of rate hikes, but do not explain 2021–23 price growth.

To study the impacts of debt relief versus cash transfers, I compare saving and consumption responses to student loan forbearance and stimulus checks in the 2020 CARES Act. Borrowers non-optimally use much of the liquidity received from for- bearance to voluntarily prepay 0%-interest student debt instead of high-interest obligations, despite prioritizing high-interest debts when receiving stimulus checks. Consistent with this flypaper effect, the marginal propensity to spend (MPX) out of forbearance liquidity is less than half that of stimulus checks. A calibration exercise estimates that the flypaper effect makes forbearance less effective and more costly as a countercyclical fiscal tool.

We present a new model of competition between digital media platforms with targeted advertising. The model adds new insights around how user heterogeneity and overlap, along with user and advertiser substitution patterns, determine equilibrium ad load. We apply the model to evaluate the proposed separation of Facebook and Instagram. We estimate structural parameters using evidence on diminishing returns to advertising from a new randomized experiment and information on user overlap, diversion ratios, and price elasticity from earlier experiments. In counterfactual simulations, a Facebook-Instagram separation increases ad loads, transferring surplus from platforms and users to advertisers, with limited total surplus effects.

This paper studies the impact of the emerging market for “buy now, pay later” (BNPL) installment loans on consumption patterns using detailed financial transactions data. For liquidity-constrained consumers, BNPL increases total spending and overdraft fees, but also facilitates greater expenditure smoothing. For all users, BNPL access boosts spending on retail goods, suggesting static substitution towards retail consumption. These inter-temporal and static substitution effects are much larger than a reasonably-calibrated lifecycle model with liquidity constraints can capture. Our findings are more consistent with a “liquidity flypaper effect” whereby the additional retail liquidity from BNPL “sticks where it hits,” increasing short-term spending.

Minimum payments on credit card debt allow consumers to repay slowly: despite being unsecured, the average $7,000 balance generally amortizes in over 20 years. We study how lenders choose these minimum payments and the impacts of these choices on equilibrium consumer debt outcomes. When short-term illiquidity makes many borrowers unable to make higher payments, lenders set low minimums to limit default costs. Alternatively, if many borrowers make near-minimum payments for reasons besides illiquidity (e.g., due to anchoring), lenders set low minimums to generate interest revenue. To separate these two forces, we use payment-level data from a credit bureau to document a new fact about intra-temporal debt repayment. Consumers often revolve high-interest credit card debt while making excess payments on low-interest installment debt, providing evidence that low payments aren't solely liquidity-driven. We use this fact to estimate an empirical model that predicts realistically low lender minimums. The model suggests that without anchoring, minimums would be over twice as high for most borrowers. Lenders amplify consumer biases, accounting for 20% of the total increase in credit card debt and 85% of defaults from anchoring in our model.

This paper uses mutual fund manager data to examine how managers' performance incentives generated speculative demand during the 2020-2022 cryptocurrency boom and bust. We find that managers with strong relative performance incentives began investing in crypto after their competitors began investing in it, consistent with a model of rational performance hedging. In contrast, managers who invest their personal wealth in the funds that they manage, who have strong direct performance incentives, were significantly less responsive to their competitors' investment decisions. Our findings suggest that relative performance incentives can encourage managers to mimic their competitors instead of trading on their beliefs. In equilibrium, this competitive hedging motive can magnify the scope of speculative demand.

State governments use production subsidies to attract companies and facilitate economic development. Such programs benefit state residents by increasing local labor demand but may also encourage firms to pursue suboptimal production strategies. To assess the net welfare impact of these competing effects, I develop a general equilibrium framework with multiregional production, rich firm heterogeneity, and production subsidies that vary across states and between firms. Eliminating subsidies would increase total US welfare by 1.1%, despite costs to peripheral states in the Deep South and Northwest.