We estimate consumption Euler equations using U.K. household-level data, employing a switching regression technique. We find excess sensitivity to income for one group of households but not for a second group. The likelihood of excess sensitivity is greater for the young, those without liquid assets, the degree-educated, ethnic minorities and those with negative home equity, consistent with liquidity constraints and buffer-stock saving. Housing capital gains affect the consumption plans of the excess sensitivity group of households, but not the other group. These results are consistent with a for housing. Around 20% 40% of U.K. households display excess sensitivity.
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Volume (Year): 13 (2009) Issue (Month): 03 (June) Pages: 305-326 Download reference. The following formats are available: HTML
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