Consumer credit usage in Canada during the coronavirus pandemic

The recent COVID-19 pandemic has devastated economies worldwide. Using detailed, monthly data from a major consumer credit reporting agency in Canada, we have examined individuals? use of credit cards and home-equity lines of credit (HELOCs). We found a dramatic leftward shift in the distribution of credit card and HELOC outstanding balances, providing evidence for a widespread reduction in credit usage. Our findings suggest that, during the COVID-19 recession, Canadian consumers were able to meet their financial needs without increasing their debt burdens. These results complement other findings concerning a decline in consumer spending and the results of government assistance programs, and imply that the economic consequences of this pandemic are very different from those in other recessions.

A flexible framework for intervention analysis applied to credit-card usage during the coronavirus pandemic.

We develop a variant of intervention analysis designed to measure a change in the law of motion for the distribution of individuals in a cross-section, rather than modeling the moments of the distribution. To calculate a counterfactual forecast, we discretize the distribution and employ a Markov model in which the transition probabilities are modeled as a multinomial logit distribution. Our approach is scalable and is designed to be applied to micro-level data. A wide panel often carries with it several imperfections that complicate the analysis when using traditional time-series methods; our framework accommodates these imperfections. The result is a framework rich enough to detect intervention effects that not only shift the mean, but also those that shift higher moments, while leaving lower moments unchanged. We apply this framework to document the changes in credit usage of consumers during the COVID-19 pandemic. We consider multinomial logit models of the dependence of credit-card balances, with categorical variables representing monthly seasonality, homeownership status, and credit scores. We find that, relative to our forecasts, consumers have greatly reduced their use of credit. This result holds for homeowners and renters as well as consumers with both high and low credit scores.