Consumption and initial mortgage conditions: evidence from survey data
Economic theory predicts that the consumption path of unconstrained homeowners responds to the interest rate, while the consumption path of credit constrained homeowners is determined by the size and timing of payments (mortgage maturity). We exploit the rapid expansion of mortgage markets during the last decade in Spain and a very detailed survey on household finances to estimate group-specific consumption responses to changes in the credit conditions. Our estimates suggest that the consumption of households headed by an individual with high school respondsmore to mortgage maturity than to the interest rate spread. The consumption of the rest of indebted households is insensitive to loan maturity. Those results are confirmed when we instrument loan maturity exploiting the fact that banks are reluctant to offer contracts with age at maturity above 65. An interpretation of those results is that households headed by middle education individuals, 8% of our sample, behave as credit constrained. JEL Classification: D91, E91
|Date of creation:||Feb 2011|
|Date of revision:|
|Contact details of provider:|| Postal: 60640 Frankfurt am Main, Germany|
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Annamaria Lusardi & Peter Tufano, 2009.
"Debt Literacy, Financial Experiences, and Overindebtedness,"
CeRP Working Papers
83, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- Annamaria Lusardi & Peter Tufano, 2009. "Debt Literacy, Financial Experiences, and Overindebtedness," NBER Working Papers 14808, National Bureau of Economic Research, Inc.
- Lusardi, Annamaria & Tufano, Peter, 2009. "Debt literacy, financial experiences, and overindebtedness," CFS Working Paper Series 2009/08, Center for Financial Studies (CFS).
- Besley, Timothy & Meads, Neil & Surico, Paolo, 2008.
"Household External Finance and Consumption,"
25, Monetary Policy Committee Unit, Bank of England.
- Richard Disney & John Gathergood & Andrew Henley, 2010. "House Price Shocks, Negative Equity, and Household Consumption in the United Kingdom," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1179-1207, December.
- Rob Alessie & Michael Devereux & Guglielmo Weber, 1993.
"Intertemporal consumption, durables and liquidity constraints: a cohort analysis,"
IFS Working Papers
W93/07, Institute for Fiscal Studies.
- Alessie, Rob & Devereux, Michael P. & Weber, Guglielmo, 1997. "Intertemporal consumption, durables and liquidity constraints: A cohort analysis," European Economic Review, Elsevier, vol. 41(1), pages 37-59, January.
- S�ren Leth-Petersen, 2010. "Intertemporal Consumption and Credit Constraints: Does Total Expenditure Respond to an Exogenous Shock to Credit?," American Economic Review, American Economic Association, vol. 100(3), pages 1080-1103, June.
- Tullio Jappelli, 1990. "Who is Credit Constrained in the U. S. Economy?," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 219-234.
When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20111297. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications)
If references are entirely missing, you can add them using this form.