Article ID Journal Published Year Pages File Type
982332 The Quarterly Review of Economics and Finance 2010 9 Pages PDF
Abstract
This research addresses the controversial bank policy of paying - rather than bouncing - overdrawn checks, debits or ATM withdrawals. We argue that it should fall under lending regulations only if consumers use the program to get intentional loans. In contrast, if the program primarily applies to checking account activity then it should fall under checking account regulations. A model of precautionary balance holding and checking account customer data are used to estimate the likelihood of overdrafting. Predicted overdrafts are compared to actual overdrafts to conclude that 79% are explained by the model and thus thought to be mistakes due to the stochastic nature of household expenditures.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
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