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Wealth effects in the euro area

Author

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  • Guerrieri, Cinzia
  • Mendicino, Caterina

Abstract

How sizable is the wealth effect on consumption in euro area countries? To address this question, we use newly available harmonized euro area wealth data and the methodology in Carroll et al. (2011b). We find that the marginal propensity to consume out of total wealth averaged across the largest euro area economies is around 3 cents per euro, with a marginal propensity to consume out of financial wealth significantly larger than of housing wealth. Country-group estimates document no significant differences between the largest economies and the rest of the sample. In contrast, remarkable differences emerge between periphery and core countries. JEL Classification: C22, E21, E32, E44

Suggested Citation

  • Guerrieri, Cinzia & Mendicino, Caterina, 2018. "Wealth effects in the euro area," Working Paper Series 2157, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20182157
    Note: 1774743
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2157.en.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Garbinti, Bertrand & Lamarche, Pierre & Savignac, Frederique, 2024. "Wealth Heterogeneity and the Marginal Propensity to Consume out of Wealth," CEPR Discussion Papers 19413, C.E.P.R. Discussion Papers.
    2. Gabe Jacob de Bondt & Arne Gieseck & Zivile Zekaite, 2020. "Thick modelling income and wealth effects: a forecast application to euro area private consumption," Empirical Economics, Springer, vol. 58(1), pages 257-286, January.
    3. Haertel, Thomas & Hamburg, Britta & Kusin, Vladimir, 2022. "The macroeconometric model of the Bundesbank revisited," Technical Papers 01/2022, Deutsche Bundesbank.
    4. Garbinti, Bertrand & Lamarche, Pierre & Savignac, Frédérique & Lecanu, Charlélie, 2020. "Wealth effect on consumption during the sovereign debt crisis: households heterogeneity in the euro area," Working Paper Series 2357, European Central Bank.
    5. Slacalek, Jiri & Tristani, Oreste & Violante, Giovanni L., 2020. "Household balance sheet channels of monetary policy: A back of the envelope calculation for the euro area," Journal of Economic Dynamics and Control, Elsevier, vol. 115(C).
    6. de Bondt, Gabe & Gieseck, Arne & Zekaite, Zivile & Herrero, Pablo, 2019. "Disaggregate income and wealth effects in the largest euro area countries," Working Paper Series 2343, European Central Bank.
    7. Stefano Colonnello & Roberto Marfè & Qizhou Xiong, 2021. "Housing Yields," Working Papers 2021:21, Department of Economics, University of Venice "Ca' Foscari", revised 2021.
    8. Dimitrios Sideris & Georgia Pavlou, 2021. "Disaggregate income and wealth effects on private consumption in Greece," Working Papers 293, Bank of Greece.
    9. Konstantina Manou & Panagiotis Palaios & Evangelia Papapetrou, 2021. "Housing wealth, household debt, and financial assets: Are there implications for consumption?," Empirical Economics, Springer, vol. 61(3), pages 1253-1279, September.
    10. Bertrand Garbinti & Pierre Lamarche & Fredérique Savignac, 2024. "Wealth Heterogeneity and the Marginal Propensity to Consume out of Wealth," Working Papers 2022-02, Center for Research in Economics and Statistics.
    11. Le Roux, Julien & Roma, Moreno, 2019. "Accuracy and determinants of self-assessed euro area house prices," Working Paper Series 2328, European Central Bank.

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    More about this item

    Keywords

    consumption dynamics; financial assets; households wealth; wealth effects;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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