Wealth Shocks and MPC Heterogeneity

32 Pages Posted: 15 Aug 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 - Department of Economics and Statistics; Center for Studies in Economics and Finance - CSEF; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

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: August 1, 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, E21

Suggested Citation

Christelis, Dimitrios and Georgarakos, Dimitris and Jappelli, Tullio and Pistaferri, Luigi and van Rooij, Maarten, Wealth Shocks and MPC Heterogeneity (August 1, 2019). De Nederlandsche Bank Working Paper No. 645, Available at SSRN: https://ssrn.com/abstract=3436771 or http://dx.doi.org/10.2139/ssrn.3436771

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

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

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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