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Wealth shocks and MPC heterogeneity

Dimitris Christelis (), Dimitris Georgarakos (), Tullio Jappelli (), Luigi Pistaferri and Maarten van Rooij ()

DNB Working Papers from Netherlands Central Bank, Research Department

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 (search for similar items in EconPapers)
JEL-codes: D12 D14 E21 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-mac
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Working Paper: Wealth Shocks and MPC Heterogeneity (2019) Downloads
Working Paper: Wealth Shocks and MPC Heterogeneity (2019) Downloads
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