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Households' Response to Wealth Changes: Do Gains or Losses make a Difference?

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  • Robert Paul Berben
  • Kerstin Bernoth
  • Mauro Mastrogiacomo

Abstract

We estimate the excess impact of financial asset capital losses relative to gains on household active savings and durable goods consumption in the Netherlands. The sample period covers both the stock market boom during the 90’s, and the bear period afterwards. The results suggest that households react more to capital losses than to capital gains. Failing to take into account this asymmetry may seriously bias the estimates of the marginal propensity to consume out of wealth.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 090.

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Date of creation: Feb 2006
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Handle: RePEc:dnb:dnbwpp:090

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Keywords: Household savings; wealth effect; capital gains;

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Citations

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Cited by:
  1. Siedschlag, Iulia, 2009. "Macroeconomic Differentials and Adjustment in the Euro Area," Papers RB2009/3/1, Economic and Social Research Institute (ESRI).
  2. Mark van Duijn & Maarten Lindeboom & Mauro Mastrogiacomo & M. Lundborg, 2009. "Pension plans and the retirement replacement rates in the Netherlands," CPB Discussion Paper 118, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Mauro Mastrogiacomo & Rob Alessie, 2011. "Did you really save so little for your retirement? An analysis of retirement savings and unconventional retirement accounts," CPB Discussion Paper 200, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Wim Suyker, 2006. "Nuancing the favourable assessments of the Nordic economies," CPB Memorandum 153, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Dnb, 2011. "DELFI : DNB’s Macroeconomic Policy Model of the Netherlands," DNB Occasional Studies 901, Netherlands Central Bank, Research Department.
  6. Horag Choi & Nelson C. Mark, 2009. "Trending Current Accounts," NBER Working Papers 15244, National Bureau of Economic Research, Inc.
  7. Jakubik, Petr, 2011. "Households’ response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland, Institute for Economies in Transition, revised 16 May 2011.
  8. Barrett, Alan & Bergin, Adele & FitzGerald, John & Traistaru-Siedschlag, Iulia, 2006. "Economic Assessment of the Euro Area: Forecasts and Policy Analysis, Autumn Report 2006," Research Series, Economic and Social Research Institute (ESRI), number sustat22.
  9. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
  10. Henk Kranendonk & Johan Verbruggen, 2007. "SAFFIER; a multi-purpose model of the Dutch economy for short-term and medium-term analyses," CPB Document 144, CPB Netherlands Bureau for Economic Policy Analysis.

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