Christine Dobridge is an economist in the Division of Financial Stability Policy and Research at the Federal Reserve Board of Governors, where she conducts research on fiscal policy actions, household finances, and government regulation. Previously, Dr. Dobridge served as the Deputy Assistant Secretary for Macroeconomic Analysis and the Senior Advisor for Economic Policy at the U.S. Treasury Department during the U.S. financial crisis. She has also worked as an economist for Deutsche Bank Securities, Inc. and served on the staff of the Council of Economic Advisers. She holds an M.A. and Ph.D. in finance from the Wharton School at the University of Pennsylvania, an M.A. in economics from New York University, and a B.A. in economics from Wellesley College.
I provide empirical evidence that the effect of high-cost credit access on household material well-being depends on if a household is experiencing temporary financial distress. Using detailed data on household consumption and location, as well as geographic variation in access to high-cost payday loans over time, I find that payday credit access improves well-being for households in distress by helping them smooth consumption. In periods of temporary financial distress—after extreme weather events like hurricanes and blizzards—I find that payday loan access mitigates declines in spending on food, mortgage payments, and home repairs. In an average period, however, I find that access to payday credit reduces well-being. Loan access reduces spending on nondurable goods overall and reduces housing- and food-related spending particularly. These results highlight the state-dependent nature of the effects of high-cost credit as well as the consumption-smoothing role that it plays for households with limited access to other forms of credit.
