Analyzing the Effects of Financial and Housing Wealth on Consumption using Micro Data

May 24, 2019

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Format: Chicago

Carlos Caceres. Analyzing the Effects of Financial and Housing Wealth on Consumption using Micro Data, (USA: International Monetary Fund, 2019) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper analyzes the existence of “wealth effects” derived from net equity (in the form of housing, financial assets, and total net worth) on consumption. The study uses longitudinal household-level data?from the Panel Study of Income Dynamics (PSID) ?covering about 7,000-9,000 households in the U.S., with the estimations carried over the period 1999-2017. Overall, wealth effects are found to be relatively large and significant for housing wealth, but less so for other types of wealth, including stocks. Furthermore, the analysis shows how these estimated marginal propensities to consume (MPC) from wealth are closely linked to household characteristics, including income and demographic factors. Finally, underlying structural changes in household characteristics point to potentially lower aggregate MPCs from wealth going forward.

Subject: Consumption, Household consumption, Housing, Housing prices, Income, National accounts, Prices

Keywords: Consumption, Core estimation, Financial asset, Global, Home equity, Household consumption, Household surveys, Housing, Housing and financial wealth, Housing prices, Housing wealth, Income, Income distribution, MPC, MPC estimate, Nonfinancial wealth, Price, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/115
Stock No:

WPIEA2019115
ISBN:

9781498316477
ISSN:

1018-5941

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