NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Wealth Shocks and MPC Heterogeneity

Dimitris Christelis, Dimitris Georgarakos, Tullio Jappelli, Luigi Pistaferri, Maarten van Rooij

NBER Working Paper No. 25999
Issued in June 2019
NBER Program(s):Economic Fluctuations and Growth

We use the responses of a representative sample of Dutch households to survey questions that ask how much their consumption would change in response to unexpected, permanent, positive or negative shocks to their home value. The average MPC is in the 2.1-4.7% range, in line with econometric estimates that use housing wealth and consumption realizations. However, our analysis uncovers significant sample heterogeneity, with over 90% of the sample reporting no consumption adjustment to positive or negative wealth shocks. The relation between the MPC from wealth shocks and cash-on-hand is negative, consistent with models with precautionary saving and liquidity constraints.

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Document Object Identifier (DOI): 10.3386/w25999

 
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