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Attenuation bias, recall error and the housing wealth effect

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  • McCarthy, Yvonne

    (Central Bank of Ireland)

  • McQuinn, Kieran

    (Central Bank of Ireland)

Abstract

The greater use of microeconomic and survey based data in addressing key financial stability related questions is a natural outcome of the recent financial crisis. Amongst other benefits, the use of such data enables a more precise understanding of the differing attitudes and responses of individual agents such as households to financial shocks. However, some difficulties can arise with the use, in particular, of survey data in this regard. In this paper we calculate measurement error in the house prices “recalled” by a representative sample of mortgaged Irish households and illustrate the degree of attenuation bias consequently introduced into estimates of housing wealth effects, when recall as opposed to actual house prices are used.

Suggested Citation

  • McCarthy, Yvonne & McQuinn, Kieran, 2014. "Attenuation bias, recall error and the housing wealth effect," Research Technical Papers 06/RT/14, Central Bank of Ireland.
  • Handle: RePEc:cbi:wpaper:06/rt/14
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    More about this item

    Keywords

    Attenuation Bias; Recall Error; Consumption; House Prices.;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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