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House Price Shocks, Negative Equity and Household Consumption in the UK in the 1990s

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Author Info

  • Disney, Richard

    (University of Nottingham)

  • Andrew Henley

    (and Institute for Fiscal Studies)

  • David Jevons

    (University of Wales Aberystwyth)

Abstract

We examine the impact of housing capital gains on savings behaviour during the 1990s British housing market cycle using microdata from the British Household Panel Survey and county-level house price data. We condition the models on household real financial capital gains using Family Resources Survey data. We find a marginal propensity to consume out of housing wealth of between 0.01 and 0.03, depending on specification. Among our novel findings are asymmetric behaviour between periods of house price rises and falls, with stronger consumption response during periods of house price increases, and a disproportionate impact on saving if the household has negative housing equity.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 64.

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Date of creation: 29 Aug 2002
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Handle: RePEc:ecj:ac2002:64

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Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
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Web page: http://www.res.org.uk/society/annualconf.asp
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Cited by:
  1. Márquez, Elena & Martínez-Cañete, Ana R. & Pérez-Soba, Inés, 2013. "Wealth shocks, credit conditions and asymmetric consumption response: Empirical evidence for the UK," Economic Modelling, Elsevier, vol. 33(C), pages 357-366.
  2. Eva Sierminska & Yelena Takhtamanova, 2007. "Wealth effects out of financial and housing wealth: cross country and age group comparisons," Working Paper Series 2007-01, Federal Reserve Bank of San Francisco.
  3. Carroll, Christopher D. & Otsuka, Misuzu & Slacalek, Jirka, 2006. "How large is the housing wealth effect? A new approach," CFS Working Paper Series 2006/35, Center for Financial Studies (CFS).
  4. Richard Disney & Sarah Bridges & John Gathergood, 2006. "Housing Wealth and Household Indebtedness: Is there a Household 'Financial Accelerator'?," Working Papers 2006/12, Czech National Bank, Research Department.
  5. Mauro Mastrogiacomo & R.P. Berben & K. Bernoth, 2006. "Households' response to wealth changes; do gains or losses make a difference," CPB Discussion Paper 63, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Olympia Bover, 2005. "Wealth effects on consumption: microeconometric estimates from the Spanish survey of household finances," Banco de Espa�a Working Papers 0522, Banco de Espa�a.
  7. Bover, Olympia, 2006. "Wealth Effects on Consumption: Microeconometric Estimates from a New Survey of Household Finances," CEPR Discussion Papers 5874, C.E.P.R. Discussion Papers.
  8. Luigi Guiso & Monica Paiella & Ignazio Visco, 2005. "Do capital gains affect consumption? Estimates of wealth effects from Italian householdsÂ’ behavior," Temi di discussione (Economic working papers) 555, Bank of Italy, Economic Research and International Relations Area.
  9. Helmut Rainer & Ian Smith, 2008. "Staying Together for the Sake of the Home? House Price Shocks and Partnership Dissolution in the UK," Discussion Paper Series, Department of Economics 200809, Department of Economics, University of St. Andrews.
  10. Chau Do & Irina Paley, 2012. "Altruism from the house: the impact of home equity on charitable giving," Review of Economics of the Household, Springer, vol. 10(3), pages 375-393, September.
  11. Hong Kong Monetary Authority, 2008. "The housing market channel of the monetary transmission mechanism in Hong Kong," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 221-234 Bank for International Settlements.

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