Wealth Shocks and Mpc Heterogeneity

29 Pages Posted: 26 Jun 2019 Last revised: 27 Jul 2019

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

Luigi Pistaferri

Stanford University; Centre for Economic Policy Research (CEPR)

Maarten van Rooij

De Nederlandsche Bank; Netspar

Multiple version iconThere are 3 versions of this paper

Date Written: June 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.

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Suggested Citation

Christelis, Dimitrios and Georgarakos, Dimitris and Jappelli, Tullio and Pistaferri, Luigi and van Rooij, Maarten, Wealth Shocks and Mpc Heterogeneity (June 2019). NBER Working Paper No. w25999, Available at SSRN: https://ssrn.com/abstract=3408934

Dimitrios Christelis (Contact Author)

Adam Smith Business School, University of Glasgow ( email )

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Dimitris Georgarakos

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

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Germany

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Tullio Jappelli

University of Naples Federico II ( email )

Luigi Pistaferri

Stanford University ( email )

Stanford, CA 94305
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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

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