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Households' response to wealth changes; do gains or losses make a difference

  • Mauro Mastrogiacomo

    ()

  • R.P. Berben
  • K. Bernoth

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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File URL: http://www.cpb.nl/sites/default/files/publicaties/download/households-response-wealth-changes-do-gains-or-losses-make-difference.pdf
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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 63.

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Date of creation: Mar 2006
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Handle: RePEc:cpb:discus:63
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