Housing Wealth and Consumption: The Role of Heterogeneous Credit Constraints / S. Borağan Aruoba, Ronel Elul, Ṣebnem Kalemli-Özcan.

Format:

Book

Author/Creator:

Aruoba, S. Borağan.

Contributor:

National Bureau of Economic Research.

Elul, Ronel.

Kalemli-Özcan, Ṣebnem.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30591.

NBER working paper series no. w30591

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We quantify the role of heterogeneity in households' financial constraints in explaining the large decline in consumption between 2006 and 2009. Using household-level data, we show that in addition to a direct effect of changes in house prices, there are sizable indirect effects from general equilibrium feedback and bank health. About 60% of the aggregate response of consumption to changes in house prices is explained by ex-ante and ex-post financial constraints, where only a specific set of households face binding ex-post financial constraints as a result of declining house prices. We find a negligible wealth effect once we account for the role of heterogonous financial constraints.

Notes:

Print version record

October 2022.