Did marginal propensities to consume change with the housing boom and bust?
Metadata
Show full item recordType
ArticleAbstract
We extend a widely used semi-structural model to identify and estimate dynamic consumption elasticities with respect to transitory income shocks. Applying our model to household survey data, we find a structural break in marginal propensities to consume following the end of the ...
See moreWe extend a widely used semi-structural model to identify and estimate dynamic consumption elasticities with respect to transitory income shocks. Applying our model to household survey data, we find a structural break in marginal propensities to consume following the end of the housing market boom, with the average across households increasing significantly. There is important heterogeneity by different household balance sheet characteristics, and the increase in the average appears to be driven by higher short-run consumption elasticities for homeowners with low liquid wealth. The change in consumption behavior is consistent with tighter borrowing constraints more than a shift in wealth distributions.
See less
See moreWe extend a widely used semi-structural model to identify and estimate dynamic consumption elasticities with respect to transitory income shocks. Applying our model to household survey data, we find a structural break in marginal propensities to consume following the end of the housing market boom, with the average across households increasing significantly. There is important heterogeneity by different household balance sheet characteristics, and the increase in the average appears to be driven by higher short-run consumption elasticities for homeowners with low liquid wealth. The change in consumption behavior is consistent with tighter borrowing constraints more than a shift in wealth distributions.
See less
Date
2024Source title
Journal of Applied EconometricsVolume
39Issue
1Publisher
WileyFunding information
ARC DE130100806Licence
Creative Commons Attribution-NonCommercial-NoDerivatives 4.0Faculty/School
Faculty of Arts and Social Sciences, School of EconomicsShare