The impact of unanticipated wealth effects on consumption: evidence from Spanish panel data

Antonio Cutanda and Juan Alberto Sanchis Llopis

Applied Economic Analysis, 2023, vol. 31, issue 93, 162-181

Abstract: Purpose - The purpose of this study is to estimate the housing wealth effect on non-durable consumption using data from the Spanish Survey of Household Finances (Encuesta Financiera de las Familias, SHF) for the period 2002–2017. Design/methodology/approach - The authors aim at identifying the effect of anticipated and unanticipated housing wealth changes on consumption with the sample of homeowners, followingPaiella and Pistaferri (2017). Findings - Results of this study lead us to conclude that there exists a strong housing wealth effect on consumption for the Spanish households. Originality/value - The authors provide evidence against the permanent income model. They also analyse how the results change with income expectations, age and the household indebtedness rate. Finally, they detect a strong excess sensitivity to income.

Keywords: Wealth effect on consumption; Subjective expectations; Instrumental variables; Panel data; C23; C26; D12; D15; E21 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:aeapps:aea-03-2023-0085

DOI: 10.1108/AEA-03-2023-0085

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