Households' Response to Wealth Changes: Do Gains or Losses make a Difference?

Robert Paul Berben, Kerstin Bernoth () and Mauro Mastrogiacomo

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: We estimate the excess impact of financial asset capital losses relative to gains on household active savings and durable goods consumption in the Netherlands. The sample period covers both the stock market boom during the 90’s, and the bear period afterwards. The results suggest that households react more to capital losses than to capital gains. Failing to take into account this asymmetry may seriously bias the estimates of the marginal propensity to consume out of wealth.

Keywords: Household savings; wealth effect; capital gains (search for similar items in EconPapers)
JEL-codes: D12 E21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-fmk and nep-mac
Date: 2006-02
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Related works:
Working Paper: Households' Response to Wealth Changes: Do Gains or Losses make a Difference? (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:dnb:dnbwpp:090

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