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Access to Home Equity and Consumption: Evidence from a Policy Experiment

47 Pages Posted: 19 Jun 2013 Last revised: 30 Sep 2015

Sumit Agarwal

Georgetown University - Department of Finance

Wenlan Qian

National University of Singapore - NUS Business School

Date Written: September 29, 2015

Abstract

Using unique consumer financial transactions of more than 56,000 consumers, we study the consumption response to a housing policy experiment in Singapore that resulted in a decrease in access to home equity. Using difference-in-differences analysis, we find a significant negative consumption response to the policy shock. Moreover, the consumption response is concentrated in credit card spending, and is stronger among individuals with limited access to credit market or with high precautionary saving motive. These results suggest that a decrease in access to home equity reduces the role of housing as a self-insurance mechanism for consumption smoothing.

Keywords: Consumption, Spending, Debt, Credit Cards, Home Equity, Household Finance, Banks, Loans, Durable Goods, Discretionary Spending, Precautionary Savings, Credit Constraints

JEL Classification: D12, D14, D91, E21, E51, E62, G21, H31

Suggested Citation

Agarwal, Sumit and Qian, Wenlan, Access to Home Equity and Consumption: Evidence from a Policy Experiment (September 29, 2015). Available at SSRN: https://ssrn.com/abstract=2281358 or http://dx.doi.org/10.2139/ssrn.2281358

Sumit Agarwal (Contact Author)

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-8207 (Phone)

HOME PAGE: http://www.ushakrisna.com

Wenlan Qian

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

HOME PAGE: http://sites.google.com/site/wenlanqian/

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