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Housing equity, saving and debt dynamics over the Great Recession

Author

Listed:
  • William Elming

    () (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Andreas Ermler

    (Institute for Fiscal Studies)

Abstract

This paper uses the large and heterogeneous house price shocks in Denmark from 2006-2009 to provide new evidence on the contested determinants of the correlation between house prices and saving. Crucially, to compare the savings behaviour of home-owners who experienced di fferent house price shocks but similar shocks to income expectations, we exploit the structure of the wage setting process in the Danish public sector. We fi nd strong evidence of a causal link between changes in house prices and saving for young and old home-owners, both through a direct wealth eff ect and through housing equity serving as collateral or precautionary wealth.

Suggested Citation

  • William Elming & Andreas Ermler, 2016. "Housing equity, saving and debt dynamics over the Great Recession," IFS Working Papers W16/12, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:16/12
    as

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    File URL: http://www.ifs.org.uk/uploads/publications/wps/wp201612.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Housing; Saving; Wealth e ect; Collateral; Debt dynamics;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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