IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/17747.html

Housing Wealth and Consumption: The Role of Heterogeneous Credit Constraints

Author

Listed:
  • Aruoba, Boragan
  • Elul, Ronel
  • Kalemli-Ozcan, Sebnem

Abstract

We quantify the role of heterogeneity in households’ financial constraints in explaining the link between the large decline in aggregate consumption and the decline in house values between 2006 and 2009 using individual-level data. Constraints that are triggered by a decline in house values, and a small fraction of consumers facing particularly severe constraints prior to the decline in house values explain 76% of the aggregate response. Local general equilibrium feedback and a decline in bank credit to consumers make up the remaining 24%. We find no contribution of a pure wealth effect in explaining the consumption decline.

Suggested Citation

  • Aruoba, Boragan & Elul, Ronel & Kalemli-Ozcan, Sebnem, 2022. "Housing Wealth and Consumption: The Role of Heterogeneous Credit Constraints," CEPR Discussion Papers 17747, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:17747
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP17747
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:17747. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.