Download This PaperWealth Shocks and MPC Heterogeneity
28 Pages Posted: 19 Jun 2019
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Wealth Shocks and MPC Heterogeneity
Wealth Shocks and MPC Heterogeneity
Wealth Shocks and MPC Heterogeneity
Date Written: June 6, 2019
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: Wealth Shocks, Marginal Propensity to Consume, Housing, Heterogeneity
JEL Classification: D12,D14,D21
Suggested Citation: Suggested Citation
Dimitris Georgarakos
European Central Bank (ECB) - Directorate General Research ( email )
Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany
European Corporate Governance Institute (ECGI)
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Maarten Van Rooij
De Nederlandsche Bank ( email )
P.O. Box 98
Amsterdam, 1000 AB
Netherlands
HOME PAGE: http://www.dnb.nl/en/onderzoek-2/onderzoekers/overzicht-persoonlijke-paginas/dnb150127.jsp