Working Paper: NBER ID: w25999
Authors: Dimitris Christelis; Dimitris Georgarakos; Tullio Jappelli; Luigi Pistaferri; Maarten van Rooij
Abstract: We use the responses of a representative sample of Dutch households to survey questions that ask how much their consumption would change in response to unexpected, permanent, positive or negative shocks to their home value. The average MPC is in the 2.1-4.7% range, in line with econometric estimates that use housing wealth and consumption realizations. However, our analysis uncovers significant sample heterogeneity, with over 90% of the sample reporting no consumption adjustment to positive or negative wealth shocks. The relation between the MPC from wealth shocks and cash-on-hand is negative, consistent with models with precautionary saving and liquidity constraints.
Keywords: No keywords provided
JEL Codes: D12; D14; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| housing wealth shocks (G51) | consumption (E21) |
| positive wealth shocks (E21) | consumption (E21) |
| negative wealth shocks (E21) | consumption (E21) |
| cash-on-hand (E41) | MPC (E42) |
| high LTV ratios (G32) | consumption response to negative shocks (E21) |