Working Paper: NBER ID: w31445
Authors: Darren Aiello; Scott R. Baker; Tetyana Balyuk; Marco Di Maggio; Mark J. Johnson; Jason D. Kotter
Abstract: This paper uses transaction-level data across millions of accounts to identify cryptocurrency investors and evaluate how fluctuations in individual crypto wealth affect household consumption, equity investment, and local real estate markets. We estimate an MPC out of unrealized crypto gains that is more than double the MPC out of unrealized equity gains but smaller than the MPC from exogenous cash flow shocks. This MPC is mostly driven by increases in cash/check spending and mortgages. Moreover, households sell crypto to increase both discretionary as well as housing spending. As a result, crypto wealth causes house price appreciation—counties with higher crypto wealth see higher growth in home values following high crypto returns. Our results indicate that cryptocurrencies have substantial spillover effects on the real economy through consumption and investment into other asset classes.
Keywords: cryptocurrency; household consumption; investment; real estate; marginal propensity to consume
JEL Codes: G23; G50; G51; R31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| individual crypto wealth (D14) | household consumption (D10) |
| crypto wealth (G13) | cash/check spending (D12) |
| crypto wealth (G13) | mortgage payments (G21) |
| crypto wealth (G13) | discretionary spending (H61) |
| county-level crypto wealth (H79) | house price growth (R31) |
| per capita county-level retail crypto wealth (G50) | county house prices (R31) |
| passive gains in county-level crypto wealth (G59) | growth in county crypto wealth (O49) |