Wealth Effects in the Euro Area

46 Pages Posted: 19 Jun 2018

See all articles by Cinzia Guerrieri

Cinzia Guerrieri

LUISS Guido Carli University

Caterina Mendicino

Bank of Portugal; European Central Bank (ECB) - Directorate General Research

Date Written: June 15, 2018

Abstract

How sizable is the wealth effect on consumption in euro area countries? To address this question, we use newly available harmonized euro area wealth data and the methodology in Carroll et al. (2011b). We find that the marginal propensity to consume out of total wealth averaged across the largest euro area economies is around 3 cents per euro, with a marginal propensity to consume out of financial wealth significantly larger than of housing wealth. Country-group estimates document no significant differences between the largest economies and the rest of the sample. In contrast, remarkable differences emerge between periphery and core countries.

Keywords: households wealth, financial assets, consumption dynamics, wealth effects

JEL Classification: C22, E21, E32, E44

Suggested Citation

Guerrieri, Cinzia and Mendicino, Caterina, Wealth Effects in the Euro Area (June 15, 2018). ECB Working Paper No. 2157. Available at SSRN: https://ssrn.com/abstract=3198537

Cinzia Guerrieri

LUISS Guido Carli University ( email )

LUISS Guido Carli University, Students
Rome
Italy

Caterina Mendicino (Contact Author)

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

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

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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