EconPapers    
Economics at your fingertips  
 

The Housing Wealth Effect: Quasi-Experimental Evidence

Dany Kessel (), Björn Tyrefors and Roine Vestman

No 361, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: We exploit a quasi-experiment to provide new evidence on the magnitude of the housing wealth effect. We estimate an immediate shock of approximately - 15% to house prices close to one of Stockholm's airports after its operations were unexpectedly continued as a result of political bargaining. This source of price variation is ideal to identify housing wealth effects since it is local and unrelated to variation in macroeconomic conditions. Using a household data set with granular geographic information on location of primary residence, we find an elasticity of 0.45 among purchasers of new cars. Converting our estimate to an aggregate MPC on cars, it is however only 0.13 cents per dollar. The MPC is entirely concentrated to homeowners with a combined loan-to-value ratio between 0.6 and 0.8 which, on the one hand, confirms the key role of household balance sheets but on the other hand refutes a monotone relationship between response and household leverage.

Keywords: House prices; housing wealth; consumption; house price elasticity; marginal propensity to consume; collateral effect (search for similar items in EconPapers)
JEL-codes: D12 E21 E32 E44 E60 (search for similar items in EconPapers)
Pages: 87 pages
Date: 2018-12-01
New Economics Papers: this item is included in nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://www.riksbank.se/globalassets/media/rapport ... imental-evidence.pdf Full text (application/pdf)

Related works:
Working Paper: The Housing Wealth Effect: Quasi-Experimental Evidence (2019) Downloads
Working Paper: The Housing Wealth Effect: Quasi-Experimental Evidence (2019)
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:hhs:rbnkwp:0361

Access Statistics for this paper

More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().

 
Page updated 2020-03-20
Handle: RePEc:hhs:rbnkwp:0361