IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v13y2009i03p305-326_08.html
   My bibliography  Save this article

Excess Sensitivity, Liquidity Constraints, And The Collateral Role Of Housing

Author

Listed:
  • Benito, Andrew
  • Mumtaz, Haroon

Abstract

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 “collateral channel” for housing. Around 20%–40% of U.K. households display excess sensitivity.

Suggested Citation

  • Benito, Andrew & Mumtaz, Haroon, 2009. "Excess Sensitivity, Liquidity Constraints, And The Collateral Role Of Housing," Macroeconomic Dynamics, Cambridge University Press, vol. 13(3), pages 305-326, June.
    • Handle: RePEc:cup:macdyn:v:13:y:2009:i:03:p:305-326_08
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100508080061/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Funke, Michael & Paetz, Michael, 2012. "A DSGE-based assessment of nonlinear loan-to-Value policies: Evidence from Hong Kong," BOFIT Discussion Papers 11/2012, Bank of Finland Institute for Emerging Economies (BOFIT).
    2. Andrew Benito & Jumana Saleheen, 2013. "Labour Supply as a Buffer: Evidence from UK Households," Economica, London School of Economics and Political Science, vol. 80(320), pages 698-720, October.
    3. Umar Faruqui & Samah Torchani, 2012. "How Important Are Liquidity Constraints for Canadian Households? Evidence from Micro-Data," Discussion Papers 12-9, Bank of Canada.
    4. M.A. Akudugu, 2011. "Rural banks' financial capital and livelihoods development of women farmers in Ghana," Journal of Enterprising Communities: People and Places in the Global Economy, Emerald Group Publishing, vol. 5(2), pages 248-264, September.
    5. James S. Cloyne & Paolo Surico, 2017. "Household Debt and the Dynamic Effects of Income Tax Changes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 45-81.
    6. Guo, Sheng, 2010. "The superior measure of PSID consumption: An update," Economics Letters, Elsevier, vol. 108(3), pages 253-256, September.
    7. Besley, Timothy & Meads, Neil & Surico, Paolo, 2008. "Household External Finance and Consumption," Discussion Papers 25, Monetary Policy Committee Unit, Bank of England.
    8. Tomas Havranek & Anna Sokolova, 2016. "Do Consumers Really Follow a Rule of Thumb? Three Thousand Estimates from 130 Studies Say "Probably Not"," Working Papers 2016/08, Czech National Bank.
    9. Khalid Sekkat & Ariane Szafarz, 2011. "Valuing Homeownership," The Journal of Real Estate Finance and Economics, Springer, vol. 43(4), pages 491-504, November.
    10. Michael Funke & Michael Paetz, 2018. "Dynamic Stochastic General EQUILIBRIUM ‐ BASED Assessment of Nonlinear Macroprudential Policies: Evidence from Hong Kong," Pacific Economic Review, Wiley Blackwell, vol. 23(4), pages 632-657, October.
    11. Declan French, 2018. "Financial strain in the United Kingdom," Oxford Economic Papers, Oxford University Press, vol. 70(1), pages 163-182.
    12. John Gathergood & Joerg Weber, 2015. "Is Poor Financial Literacy a Barrier to Home Ownership?," Discussion Papers 2015/16, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    13. Burgess, Stephen & Fernandez-Corugedo, Emilio & Groth, Charlotta & Harrison, Richard & Monti, Francesca & Theodoridis, Konstantinos & Waldron, Matt, 2013. "The Bank of England's forecasting platform: COMPASS, MAPS, EASE and the suite of models," Bank of England working papers 471, Bank of England.
    14. Tomura, Hajime, 2010. "International capital flows and expectation-driven boom-bust cycles in the housing market," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 1993-2009, October.
    15. Tomas Havranek & Anna Sokolova, 2020. "Do Consumers Really Follow a Rule of Thumb? Three Thousand Estimates from 144 Studies Say 'Probably Not'," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 97-122, January.
    16. Tatiana Kirsanova & Jack Rogers, 2013. "Fixed versus Variable Rate Debt Contracts and Optimal Monetary Policy," Discussion Papers 1306, University of Exeter, Department of Economics.
    17. Viola Angelini & Peter Simmons, "undated". "Housing Debt and Consumption," Discussion Papers 11/20, Department of Economics, University of York.
    18. repec:zbw:bofitp:2012_011 is not listed on IDEAS
    19. Kangogo, Daniel & Lagat, Job & Ithinji, Gicuru, 2013. "The Influence of Social Capital Dimensions on Household Participation in Micro-Credit Groups and Loan Repayment Performance in Uasin Gishu County, Kenya," MPRA Paper 48624, University Library of Munich, Germany.
    20. Petra Gerlach-Kristen, 2014. "Testing the Permanent Income Hypothesis for Irish Households, 1994 to 2005," The Economic and Social Review, Economic and Social Studies, vol. 45(4), pages 511-535.
    21. Mitchell, James & Weale, Martin R., 2007. "The rationality and reliability of expectations reported by British households: micro evidence from the British household panel survey," Discussion Paper Series 1: Economic Studies 2007,19, Deutsche Bundesbank.
    22. Gathergood, John & Weber, Jörg, 2017. "Financial literacy: A barrier to home ownership for the young?," Journal of Urban Economics, Elsevier, vol. 99(C), pages 62-78.
    23. Ms. Pritha Mitra, 2011. "Capital Flows to EU New Member States: Does Sector Destination Matter?," IMF Working Papers 2011/067, International Monetary Fund.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:13:y:2009:i:03:p:305-326_08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.