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The impact of unanticipated wealth effects on consumption: evidence from Spanish panel data

Author

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  • Antonio Cutanda
  • Juan Alberto Sanchis Llopis

Abstract

Purpose - The purpose of this study is to estimate the housing wealth effect on non-durable consumption using data from the Spanish Survey of Household Finances (Encuesta Financiera de las Familias, SHF) for the period 2002–2017. Design/methodology/approach - The authors aim at identifying the effect of anticipated and unanticipated housing wealth changes on consumption with the sample of homeowners, followingPaiella and Pistaferri (2017). Findings - Results of this study lead us to conclude that there exists a strong housing wealth effect on consumption for the Spanish households. Originality/value - The authors provide evidence against the permanent income model. They also analyse how the results change with income expectations, age and the household indebtedness rate. Finally, they detect a strong excess sensitivity to income.

Suggested Citation

  • Antonio Cutanda & Juan Alberto Sanchis Llopis, 2023. "The impact of unanticipated wealth effects on consumption: evidence from Spanish panel data," Applied Economic Analysis, Emerald Group Publishing Limited, vol. 31(93), pages 162-181, October.
    • Handle: RePEc:eme:aeapps:aea-03-2023-0085
    DOI: 10.1108/AEA-03-2023-0085
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    More about this item

    Keywords

    Wealth effect on consumption; Subjective expectations; Instrumental variables; Panel data; C23; C26; D12; D15; E21;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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