Housing, consumption, and credit constraints

Andreas Lehnert ()

No 2004-63, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: I test the credit-market effects of housing wealth shocks by estimating the consumption elasticity of house price shocks among households in different age quintiles. Younger households face faster expected income growth and hence would like to borrow more than older households. I estimate consumption elasticities from housing wealth by age quintile to be {4; 0; 3; 8; 3} percent. As predicted by theory, the youngest group has a higher elasticity of consumption than the next two age quintiles. That the consumption of the age quintile on the verge of retirement is responsive to housing wealth is also not surprising: I show that these households are likeliest to \"downsize\" their house and thus realize any capital gains.

Keywords: Consumption (Economics); Housing - Prices; Consumer credit (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (68)

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/2004/200463/200463abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/2004/200463/200463pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2004-63

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().