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Liquidity and Consumption. Evidence from three Post-earthquakes Reconstruction Programs in Italy

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Abstract

Exploiting three earthquakes as quasi-experiments, we analyze the response of homeowners’ consumption to public programs financing the costs of housing reconstruction, which increase households’ liquidity significantly in the short run. Although over a multi-year horizon consumption is unaffected, upfront disbursement of funds has a sizable impact on the nondurable consumption of households with low liquidity and bank debt (‘wealthy-handto- mouth’); it makes no difference for liquid households. The consumption of both groups of households is instead insensitive to funds paid directly to firms for reconstruction work, rather than channeled trough households.

Suggested Citation

  • Antonio Acconcia & Giancarlo Corsetti & Saverio Simonelli, 2015. "Liquidity and Consumption. Evidence from three Post-earthquakes Reconstruction Programs in Italy," CSEF Working Papers 396, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 16 May 2018.
    • Handle: RePEc:sef:csefwp:396
    Note: This is a substantially revised version of a paper previously circulated with the title “The Consumption Response to Liquidity-Enhancing Transfers: Evidence from Italian Earthquakes”
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    3. Johar, Meliyanni & Johnston, David W. & Shields, Michael A. & Siminski, Peter & Stavrunova, Olena, 2022. "The economic impacts of direct natural disaster exposure," Journal of Economic Behavior & Organization, Elsevier, vol. 196(C), pages 26-39.
    4. Ferrara, Laurent & Metelli, Luca & Natoli, Filippo & Siena, Daniele, 2021. "Questioning the puzzle: Fiscal policy, real exchange rate and inflation," Journal of International Economics, Elsevier, vol. 133(C).

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    More about this item

    Keywords

    Consumption; Liquidity; Mortgage; Quasi-experiment;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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