We examine the recovery of U.S. consumer spending following the COVID-19 recession using monthly transaction data for over 34,000 individuals. We find no evidence of pent-up demand driven by forced cut-backs on in-person services or curtailed purchases of durables. Instead, spending dynamics are largely consistent with hand-to-mouth behavior: Expenditures during and after the recession are correlated with income changes, especially among households with low liquidity buffers. These results underscore the central role of income and liquidity, rather than sentiment or forced savings, in driving the dynamics of consumer spending.

This paper examines how monetary policy shocks transmit to household consumption through wealth effects in a small open economy. Our analysis exploits the 2015 Swiss franc shock, when the Swiss National Bank unexpectedly abandoned the exchange rate floor to the euro triggering a sharp and persistent currency appreciation. Using granular administrative data from a retail bank and a continuous treatment estimator, we identify heterogeneous consumption responses across households with differing portfolio exposures. Households experiencing asset valuation losses reduced total spending on average by nearly four percent in the quarter following the shock, compared to the previous year. Effects persist but gradually attenuate over subsequent months. Our findings provide direct evidence on the wealth channel of monetary policy and highlight the role of exchange-rate-induced asset revaluations in shaping consumption dynamics in open economies.

We study the impact of monetary policy on household portfolios in open economies. We examine the response of retail investors to a policy shock which led to (i) a sharp appreciation of the domestic currency, (ii) a significant increase in exchange rate volatility, and (iii) the introduction of a negative policy rate. Our analysis is based on monthly, account-level data covering bank deposits, securities holdings and trades for a large sample of affluent bank clients. The policy shock leads to a shift of assets away from fixed income securities towards domestic currency bank deposits and foreign currency risky securities. Wealthier clients display a stronger portfolio shift towards risky securities in foreign currency as they search for yield. Investor attention, as measured by trading activity and contacts with bank advisors, increases temporarily after the shock

Convenience and security are the two key attributes that consumers consider when choosing between payment technologies. We examine how consumers react to an exogenous change to the convenience and security of digital payments. We study an increase in the ‘tap-and-go’ limit for contactless point-of-sale card payments. A higher ‘tap-and-go’ limit enables faster and easier verification for larger value transactions. However, a higher limit also increases security concerns, as the misappropriation of a card can lead to larger losses. Our analysis is based on anonymized transaction-level data for a large sample of debit card payments between 2019 and 2021. We reveal that the increase in the ‘tap-and-go’ limit caused a substantial increase in the consumer use of contactless payments, but had only a minor impact on first-time adoption. Our findings are consistent with a stylized model in which the convenience benefits of digital payments are largest for small-value on-the-fly transactions and security concerns are heterogeneous across consumers. In this framework, only consumers with weak security concerns adopt the technology and respond to subsequent improvements in its convenience.

We examine how payment choice affects discretionary spending for a representative sample of consumers. Our analysis is motivated by a model of intertemporal choice in which intra-month liquidity constraints are endogenously determined by payment choice and cash management. In the model, present-biased consumers overspend if they choose to pay by card, as their spending is not limited by the amount of cash at hand. Our empirical analysis is based on matched payment-diary, payment-methods and behavioral survey data. We find that present-biased consumers do spend more, the more often they use cashless payment instruments. The effect of cashless payments on spending is strong both for low and high income consumers, but not among young consumers. We find no robust evidence that consumers choose cash payments in order to self-constrain their spending.