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Consumption, household portfolios and the housing market in France
[Consommation, patrimoine des ménages et marché immobilier en France]

Author

Listed:
  • Valérie Chauvin

    (Banque de France)

  • John Muellbauer

    (Nuffield - Nuffield - University of Oxford, Institute for New Economic Thinking)

Abstract

Consumption and wealth co‑move because of shifts in credit conditions, interest rates, income expectations or demographics, whose impact should be identified to disentangle wealth effects. The findings for France from a 6‑equation model for consumption and the main elements of household portfolios are that marginal propensities to consume financial wealth are comparable to those in the US or the UK, but housing wealth effects are far weaker, and aggre‑ gate consumption falls with higher house prices relative to income. This is interpreted as the need for younger households in France then to save more if they wish to become homeowners, while other tenants can expect rents to increase in the future, saving more in consequence. The estimates suggest that during the French house price boom between 1996 and 2008, offsets from the negative effect of higher house prices and higher debt neutralized the positive effects of higher housing wealth and easier credit on consumption, evading the amplifying feedbacks, via consumption, of the US boom.

Suggested Citation

  • Valérie Chauvin & John Muellbauer, 2018. "Consumption, household portfolios and the housing market in France [Consommation, patrimoine des ménages et marché immobilier en France]," Post-Print hal-05497547, HAL.
    • Handle: RePEc:hal:journl:hal-05497547
    DOI: 10.24187/ecostat.2018.500t.1950
    Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05497547v1
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    Cited by:

    1. is not listed on IDEAS
    2. De Bonis, Riccardo & Liberati, Danilo & Muellbauer, John & Rondinelli, Concetta, 2023. "Why net worth is the wrong concept for explaining consumption: evidence from Italy," CEPR Discussion Papers 18597, Centre for Economic Policy Research.
    3. Muellbauer, John, 2016. "Macroeconomics and Consumption," CEPR Discussion Papers 11588, Centre for Economic Policy Research.
    4. Pål Boug & Håvard Hungnes & Takamitsu Kurita, 2024. "The empirical modelling of house prices and debt revisited: a policy-oriented perspective," Empirical Economics, Springer, vol. 66(1), pages 369-404, January.
    5. Menno Schellekens & Taha Yasseri, 2021. "Credit Crunch: The Role of Household Lending Capacity in the Dutch Housing Boom and Bust 1995-2018," Papers 2101.00913, arXiv.org.
    6. John Muellbauer, 2012. "When is a Housing Market Overheated Enough to Threaten Stability?," RBA Annual Conference Volume (Discontinued), in: Alexandra Heath & Frank Packer & Callan Windsor (ed.),Property Markets and Financial Stability, Reserve Bank of Australia.
    7. Muellbauer, John, 2024. "Housing and Macroprudential Policy," CEPR Discussion Papers 19702, Centre for Economic Policy Research.
    8. Federica Ciocchetta & Elisa Guglielminetti & Alessandro Mistretta, 2024. "What Drives House Prices in Europe?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(5), pages 1089-1121, October.
    9. Ruben Tarne & Dirk Bezemer & Thomas Theobald, 2021. "The Effect of borrower-specific Loan-to-Value policies on household debt, wealth inequality and consumption volatility," FMM Working Paper 70-2021, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    10. Tarne, Ruben & Bezemer, Dirk & Theobald, Thomas, 2022. "The effect of borrower-specific loan-to-value policies on household debt, wealth inequality and consumption volatility: An agent-based analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).
    11. John Muellbauer, 2019. "A Tale of Two Cities: Is Overvaluation a Capital Issue?," Springer Books, in: Rob Nijskens & Melanie Lohuis & Paul Hilbers & Willem Heeringa (ed.), Hot Property, chapter 0, pages 51-62, Springer.
    12. Bertrand Garbinti & Pierre Lamarche & Charl lie Lecanu & Frédérique Savignac, 2020. "Wealth effect on consumption during the sovereign debt crisis: Households heterogeneity in the Euro area," Working papers 751, Banque de France.
    13. Riccardo De Bonis & Danilo Liberati & John Muellbauer & Concetta Rondinelli, 2020. "Consumption and wealth: new evidence from Italy," Temi di discussione (Economic working papers) 1304, Bank of Italy, Economic Research and International Relations Area.
    14. John Muellbauer, 2015. "Housing and the Macroeconomy: Inflation and the Financial Accelerator," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 51-58, March.
    15. 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.
    16. Laura Jaramillo & Alexandre Chailloux, 2015. "It’s Not All Fiscal: Effects of Income, Fiscal Policy, and Wealth on Private Consumption," IMF Working Papers 2015/112, International Monetary Fund.
    17. Tim Congdon, 2021. "Can central banks run out of ammunition? The role of the money‐equities‐interaction channel in monetary policy," Economic Affairs, Wiley Blackwell, vol. 41(1), pages 21-37, February.
    18. Guillaume Bove & Stéphane Dees & Camille Thubin, 2020. "House Prices, Mortgage Debt Dynamics and Economic Fluctuations in France: A Semi-Structural Approach," Working papers 787, Banque de France.
    19. Muellbauer, John & Geiger, Felix & Rupprecht, Manuel, 2016. "The housing market, household portfolios and the German consumer," Working Paper Series 1904, European Central Bank.
    20. David F. Hendry, 2020. "A Short History of Macro-econometric Modelling," Economics Papers 2020-W01, Economics Group, Nuffield College, University of Oxford.
    21. repec:spo:wpmain:info:hdl:2441/5udjblpuik8sp8d8qljh06m7ng is not listed on IDEAS
    22. Muellbauer, John, 2018. "Housing, debt and the economy: a tale of two countries," National Institute Economic Review, National Institute of Economic and Social Research, vol. 245, pages 20-33, August.
    23. John Muellbauer & Pierre St-Amant & David Williams, 2015. "Credit Conditions and Consumption, House Prices and Debt: What Makes Canada Different?," Staff Working Papers 15-40, Bank of Canada.

    More about this item

    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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