Wealth Shocks, Unemployment Shocks and Consumption in the Wake of the Great Recession

Posted: 20 May 2015

See all articles by Dimitris Christelis

Dimitris Christelis

Adam Smith Business School, University of Glasgow; Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II; Center for Financial Studies (CFS); Netspar

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research; Center for Financial Studies (CFS)

Tullio Jappelli

University of Naples Federico II - Department of Economics and Statistics; Center for Studies in Economics and Finance - CSEF; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 6 versions of this paper

Date Written: February 2, 2015

Abstract

Data from the 2009 Internet Survey of the Health and Retirement Study show that many US households experienced large capital losses in housing and financial wealth, and that 5% of respondents lost their job during the Great Recession. For every loss of 10% in housing and financial wealth, the estimated drop in household expenditure was about 0.56% and 0.9%, respectively. Those who became unemployed reduced spending by 10%. In line with predictions of standard inter-temporal choice models, households who perceived the stock market shock to be permanent adjusted spending much more than those who perceived the shock to be temporary.

Keywords: Wealth shocks, Unemployment, Consumption, Great Recession

JEL Classification: E21, D91

Suggested Citation

Christelis, Dimitrios and Georgarakos, Dimitris and Jappelli, Tullio, Wealth Shocks, Unemployment Shocks and Consumption in the Wake of the Great Recession (February 2, 2015). Journal of Monetary Economics, Vol. 72, 2015, Available at SSRN: https://ssrn.com/abstract=2607726

Dimitrios Christelis

Adam Smith Business School, University of Glasgow ( email )

Room 207F, Gilbert Scott Building
University Avenue
Glasgow, Scotland G12 8QQ
United Kingdom
+44 141330 2000 (ext. 0624) (Phone)

HOME PAGE: http://www.gla.ac.uk/schools/business/staff/dimitrioschristelis/

Centre for Studies in Economics and Finance (CSEF), University of Naples Federico II ( email )

Via Cintia, Monte S. Angelo
Naples, NA 80126
Italy

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Dimitris Georgarakos

European Central Bank (ECB) - Directorate General Research ( email )

Sonnemannstrasse 20
Frankfurt am Main, 60314
Germany

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Tullio Jappelli (Contact Author)

University of Naples Federico II - Department of Economics and Statistics ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy

HOME PAGE: http://www.csef.it/people/jappelli.htm

Center for Studies in Economics and Finance - CSEF

University of Naples Federico II
Via Cinthia - Monte S. Angelo
Napoli, 80146
Italy

HOME PAGE: http://www.csef.it/people/jappelli.htm

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://www.cepr.org/researchers/details/rschcontact.asp?IDENT=106354

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

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