Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153551
Authors: 
Slacalek, Jiri
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper 1117
Abstract: 
I investigate the effect of wealth on consumption in a new dataset with financial and housing wealth from 16 countries. The baseline estimation method based on the sluggishness of consumption growth implies that the eventual (long-run) marginal propensity to consume out of total wealth is 5 cents (averaged across countries). While the wealth effects are quite strong—between 4 and 6 cents—in countries with more developed mortgage markets and in market-based, Anglo-Saxon and non euro area economies, consumption only barely reacts to wealth elsewhere. The effect of housing wealth is somewhat smaller than that of financial wealth for most countries, but not for the US and the UK. The housing wealth effect has risen substantially after 1988 as it has become easier to borrow against housing wealth.
Subjects: 
Consumption Dynamics
housing prices
Portfolio Choice
wealth effect
JEL: 
E21
E32
C22
Document Type: 
Working Paper

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