Wealth effects and the consumption of Italian households in the Great Recession
Serena Trucchi and
No W13/21, IFS Working Papers from Institute for Fiscal Studies
We estimate marginal propensities to consume from wealth shocks for Italian households. Large asset price shocks in 2008 underpin an IV estimator. A euro fall in financial or risky financial wealth resulted in cuts in annual total (non-durable) consumption of 5-9 (3.5-6) cents. There is evidence of effects for food spending. Responses of total and non-durable spending to changes in housing wealth are 0.2 to 0.4 cents/euro. Counterfactuals indicate financial wealth effects were important (relative to other factors) for consumption falls in 2008/09. Thus wealth effects on consumption can be important for households' welfare and aggregate outcomes.
Keywords: wealth effects; household consumption; 2008 crisis (search for similar items in EconPapers)
JEL-codes: D12 D91 G01 (search for similar items in EconPapers)
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Working Paper: Wealth Effects and the Consumption of Italian Households in the Great Recession (2017)
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