Housing Wealth and Consumption: The Role of Heterogeneous Credit Constraints

S. Boragan Aruoba, Ronel Elul and Sebnem Kalemli-Ozcan

No 30591, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We quantify the role of heterogeneity in households’ financial constraints in explaining the link between the large decline in aggregate consumption and the decline in house values between 2006 and 2009 using individual-level data. Constraints that are triggered by a decline in house values, and a small fraction of consumers facing particularly severe constraints prior to the decline in house values explain 76% of the aggregate response. Local general equilibrium feedback and a decline in bank credit to consumers make up the remaining 24%. We find no contribution of a pure wealth effect in explaining the consumption decline.

JEL-codes: E0 (search for similar items in EconPapers)
Date: 2022-10
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-ure
Note: EFG IFM
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w30591.pdf (application/pdf)

Related works:
Working Paper: Housing Wealth and Consumption: The Role of Heterogeneous Credit Constraints (2022)
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:nbr:nberwo:30591

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w30591

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().