The Housing Wealth Effect: Quasi-Experimental Evidence

Dany Kessel, Björn Tyrefors and Roine Vestman

No 676, 2019 Meeting Papers from Society for Economic Dynamics

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. This source of price variation is ideal for identifying housing wealth effects since it is unrelated to macroeconomic conditions. We estimate a micro elasticity of 0.45 among purchasers of new cars. The implied aggregate MPC on cars is however only 0.13 cents per dollar. The response is entirely concentrated to homeowners with a loan-to-value ratio between 0.6 and 0.8.

Date: 2019
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Related works:
Working Paper: The Housing Wealth Effect: Quasi-Experimental Evidence (2023)
Working Paper: The Housing Wealth Effect: Quasi-Experimental Evidence (2019)
Working Paper: The Housing Wealth Effect: Quasi-Experimental Evidence (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:676

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