Households' response to wealth changes: do gains or losses make a difference?

Robert-Paul Berben · Kerstin Bernoth · Mauro Mastrogiacomo

13 citations0/0 files storedRePEc: Research Papers in Economics

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Financial Literacy, Pension, Retirement Analysis Monetary Policy and Economic Impact Economic Theory and Policy

Abstract

We estimate the excess impact of financial asset capital losses relative to gains on household active savings and durable goods consumption in the Netherlands. The sample period covers both the stock market boom during the 90's, and the bear period afterwards. The results suggest that households react more to capital losses than to capital gains. Failing to take into account this asymmetry may seriously bias the estimates of the marginal propensity to consume out of wealth.

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1978On the Pooling of Time Series and Cross Section Data 2000Stock Market Wealth and Consumption 2011CONSUMPTION AND SAVING OVER THE LIFE CYCLE: HOW IMPORTANT ARE CONSUMER DURABLES?1995House Prices and Home Owner Saving Behavior 1994Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases 2000Consumer Durables and Inertial Behaviour: Estimation and Aggregation of (S, s) Rules for Automobile Purchases 2002Household Portfolios in the Netherlands 2004The impact of wealth on consumption and retirement behaviour in the UK

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