Katz headshot

Justin Katz

Cambridge, MA
Harvard University, PhD in Business Economics (expected)
Yale College, BA in Economics and Mathematics
Working papers
Buy Now, Pay Later Credit: User Characteristics and Effects on Spending Patterns (with M Di Maggio and E Williams). NBER Working Paper #30508.
    + Abstract

    Firms offering "buy now, pay later" (BNPL) point-of-sale installment loans with minimal underwriting and low interest have captured a growing fraction of the market for short-term unsecured consumer credit. We provide a detailed look into the US BNPL market by constructing a large panel of BNPL users from transaction-level data. We document characteristics of users and usage patterns, and use BNPL roll-out to provide new insights into consumer responses to unsecured credit access. BNPL access increases both total spending levels and the retail share in total spending, with magnitudes too large for standard intertemporal and static substitution effects to explain. These findings hold for consumers with and without inferred liquidity constraints. Our findings are more consistent with a "liquidity flypaper effect" where additional retail liquidity through BNPL "sticks where it hits", than a standard lifecycle model with liquidity constraints.

Saving and Consumption Responses to Student Loan Forbearance [November 2022 Slides]
    + Abstract + Survey instruments

    I study how debt relief impacts household saving and consumption compared to cash transfers by analyzing borrower responses to federal student loan forbearance in the 2020 CARES Act. Using a daily financial transactions panel, I find that borrowers manage liquidity from the payment pause non-optimally, choosing to prepay 0%-interest student debt instead of high-interest obligations. By contrast, these borrowers correctly prioritize repaying high-interest debt when receiving direct stimulus payments. This suggests a flypaper effect causing borrowers to treat liquidity from debt relief as non-fungible with other windfalls. Consistent with predictions of such an effect, borrowers display a marginal propensity to spend (MPX) out of forbearance liquidity around half the size of their MPX out of fiscal stimulus. I then design and field a student borrower survey to understand the mechanisms causing consumers to treat financial resources as non-fungible when making debt repayment decisions, and suggest how to formally incorporate results into an incomplete-markets lifecycle model. Finally, I show in a stylized economy that accounting for non-fungibility and debt repayment mistakes can have large quantitative impacts on the effectiveness and cost of forbearance as a countercyclical fiscal policy tool, and discuss implications of my results for ongoing debates about student debt forgiveness.

Competition and Speculation in Cryptocurrencies (with A Wu).
    + Abstract

    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.

Click here to download a pdf version of my CV (updated September 2022)

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