Do Homeowners Increase Consumption after the Last Mortgage Payment? An Alternative Test of the Permanent Income Hypothesis
AbstractThe maturity date of a mortgage loan marks the end of monthly mortgage payments for homeowners. In the period after the last payment, homeowners experience an increase in their disposable income. Our study interprets this event as an anticipated increase in income, and tests whether households smooth consumption over the transition period as predicted by the rational-expectation life-cycle-permanent-income hypothesis. We find households do not alter nondurable-goods consumption in the period following the last mortgage payment. Instead, they increase both financial savings and savings in durable goods such as house furnishings and entertainment equipment in the year of the last mortgage payment. © 2006 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics and Statistics.
Volume (Year): 88 (2006)
Issue (Month): 1 (February)
Contact details of provider:
Web page: http://mitpress.mit.edu/journals/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Hori, Masahiro & Shimizutani, Satoshi, 2012.
"Do households smooth expenditure over anticipated income changes? Evidence from bonus payments to public employees in Japan,"
Journal of the Japanese and International Economies,
Elsevier, vol. 26(3), pages 405-433.
- Hori, Masahiro & Shimizutani, Satoshi, 2011. "Do Households Smooth Expenditure over Anticipated Income Changes? Evidence from Bonus Payments to Public Employees in Japan," CIS Discussion paper series 532, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
- Klos, Alexander & Rottke, Simon, 2013.
"Saving and Consumption When Children Move Out,"
Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order
79786, Verein für Socialpolitik / German Economic Association.
- Simon Rottke & Alexander Klos, 2013. "Savings and Consumption When Children Move Out," SOEPpapers on Multidisciplinary Panel Data Research 621, DIW Berlin, The German Socio-Economic Panel (SOEP).
- João Ricardo Faria & Peter Mcadam, 2013.
"Anticipation of Future Consumption: A Monetary Perspective,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 45(2-3), pages 423-447, 03.
- Faria, Joao Ricardo & McAdam, Peter, 2012. "Anticipation of future consumption: a monetary perspective," Working Paper Series 1448, European Central Bank.
- Scholnick, Barry, 2009. "Credit card use after the final mortgage payment: does the magnitude of income shocks matter?," Working Paper Series 1142, European Central Bank.
- Borella, Margherita & Fornero, Elsa & Rossi, Mariacristina, 2009. "Does consumption respond to predicted increases in cash-hand availability?: Evidence from the Italian "severance pay"," Economics Letters, Elsevier, vol. 105(1), pages 127-129, October.
- Daniel Aaronson & Sumit Agarwal & Eric French, 2008. "The consumption response to minimum wage increases," Working Paper Series WP-07-23, Federal Reserve Bank of Chicago.
- Brighita Negrusa & Sonia Oreffice, 2011. "Sexual orientation and household financial decisions: evidence from couples in the United States," Review of Economics of the Household, Springer, vol. 9(4), pages 445-463, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.