IDEAS home Printed from https://ideas.repec.org/a/eee/finsta/v11y2014icp82-91.html
   My bibliography  Save this article

Financial imbalances and household welfare: Empirical evidence from the EU

Author

Listed:
  • Stracca, Livio

Abstract

This paper uses Eurobarometer survey data from 26 EU countries to evaluate whether the general public cares about financial stability and imbalances over and above their effects on macroeconomic variables such as unemployment and inflation. I confirm previous results in the literature that life satisfaction – a widely used measure of household welfare – negatively depends on the unemployment rate. In addition to previous results in the literature, I establish a strong empirical link between life satisfaction and consumer confidence as measured by the European Commission consumer survey. The main result of the paper is that life satisfaction generally does not systematically depend on a number of measures of financial imbalance based on credit and asset prices once the other macroeconomic controls are included.

Suggested Citation

  • Stracca, Livio, 2014. "Financial imbalances and household welfare: Empirical evidence from the EU," Journal of Financial Stability, Elsevier, vol. 11(C), pages 82-91.
    • Handle: RePEc:eee:finsta:v:11:y:2014:i:c:p:82-91
    DOI: 10.1016/j.jfs.2013.12.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1572308913000958
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jfs.2013.12.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mr. Luc Laeven & Mr. Fabian Valencia, 2010. "Resolution of Banking Crises: The Good, the Bad, and the Ugly," IMF Working Papers 2010/146, International Monetary Fund.
    2. Rafael Di Tella & Robert J. MacCulloch & Andrew J. Oswald, 2003. "The Macroeconomics of Happiness," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 809-827, November.
    3. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    4. Willem H. Buiter, 2013. "The Role of Central Banks in Financial Stability: How Has It Changed?," World Scientific Book Chapters, in: Douglas D Evanoff & Cornelia Holthausen & George G Kaufman & Manfred Kremer (ed.), The Role of Central Banks in Financial Stability How Has It Changed?, chapter 2, pages 11-56, World Scientific Publishing Co. Pte. Ltd..
    5. Betsey Stevenson & Justin Wolfers, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 1-102.
    6. Fabio Fornari & Livio Stracca, 2012. "What does a financial shock do? First international evidence [Financial intermediaries, financial stability and monetary policy]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 27(71), pages 407-445.
    7. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    8. Alessi, Lucia & Detken, Carsten, 2011. "Quasi real time early warning indicators for costly asset price boom/bust cycles: A role for global liquidity," European Journal of Political Economy, Elsevier, vol. 27(3), pages 520-533, September.
    9. Kyle Chauvin & David Laibson & Johanna Mollerstrom, 2011. "Asset Bubbles and the Cost of Economic Fluctuations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s1), pages 233-260, August.
    10. Robert B. Barsky & Eric R. Sims, 2012. "Information, Animal Spirits, and the Meaning of Innovations in Consumer Confidence," American Economic Review, American Economic Association, vol. 102(4), pages 1343-1377, June.
    11. Robert E. Lucas Jr., 2003. "Macroeconomic Priorities," American Economic Review, American Economic Association, vol. 93(1), pages 1-14, March.
    12. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
    13. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
    14. Nestor Gandelman & Ruben Hernandez-Murillo, 2009. "The impact of inflation and unemployment on subjective personal and country evaluations," Review, Federal Reserve Bank of St. Louis, vol. 91(May), pages 107-126.
    15. Luigino Bruni & Pier Luigi Porta (ed.), 2007. "Handbook on the Economics of Happiness," Books, Edward Elgar Publishing, number 3437.
    16. Rafael Di Tella & Robert MacCulloch, 2007. "Happiness, Contentment and Other Emotions for Central Banks," NBER Working Papers 13622, National Bureau of Economic Research, Inc.
    17. Becchetti, Leonardo & Castriota, Stefano & Giuntella, Giovanni Osea, 2010. "The effects of age and job protection on the welfare costs of inflation and unemployment," European Journal of Political Economy, Elsevier, vol. 26(1), pages 137-146, March.
    18. Mathias Drehmann & Claudio Borio & Kostas Tsatsaronis, 2011. "Anchoring Countercyclical Capital Buffers: The role of Credit Aggregates," International Journal of Central Banking, International Journal of Central Banking, vol. 7(4), pages 189-240, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bank for International Settlements, 2016. "Objective-setting and communication of macroprudential policies," CGFS Papers, Bank for International Settlements, number 57, december.
    2. Anna Kalbhenn & Livio Stracca, 2020. "Mad about Austerity? The Effect of Fiscal Consolidation on Public Opinion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 52(2-3), pages 531-548, March.
    3. Avdjiev, Stefan & Binder, Stephan & Sousa, Ricardo, 2021. "External debt composition and domestic credit cycles," Journal of International Money and Finance, Elsevier, vol. 115(C).
    4. Arnaud Joskin, 2017. "Working Paper 04-17 - Qu’est-ce qui compte pour les Belges ? Analyse des déterminants du bien-être individuel en Belgique [Working Paper 04-17 - Wat telt voor de Belgen? Analyse van de determinante," Working Papers 1704, Federal Planning Bureau, Belgium.
    5. Stracca, Livio & Kalbhenn, Anna, 2015. "Does fiscal austerity affect public opinion?," Working Paper Series 1774, European Central Bank.
    6. Philip R Lane & Livio Stracca, 2018. "Can appreciation be expansionary? Evidence from the euro area," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(94), pages 225-264.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gregor Gonza & Anže Burger, 2017. "Subjective Well-Being During the 2008 Economic Crisis: Identification of Mediating and Moderating Factors," Journal of Happiness Studies, Springer, vol. 18(6), pages 1763-1797, December.
    2. Stutzer, Alois & Frey, Bruno S., 2012. "Recent Developments in the Economics of Happiness: A Selective Overview," IZA Discussion Papers 7078, Institute of Labor Economics (IZA).
    3. Stutzer, Alois & Frey, Bruno S., 2010. "Recent Advances in the Economics of Individual Subjective Well-Being," IZA Discussion Papers 4850, Institute of Labor Economics (IZA).
    4. Rafael Di Tella & Robert MacCulloch, 2007. "Happiness, Contentment and Other Emotions for Central Banks," NBER Working Papers 13622, National Bureau of Economic Research, Inc.
    5. Badunenko, Oleg & Cordero, Jose M. & Kumbhakar, Subal C., 2021. "Are you slacking? Where do you and your country stand in the happiness pursuit?," MPRA Paper 108316, University Library of Munich, Germany.
    6. Flèche, Sarah, 2015. "Distaste for centralization: evidence from a quasi-natural experiment in Switzerland," LSE Research Online Documents on Economics 64999, London School of Economics and Political Science, LSE Library.
    7. Senik, Claudia, 2014. "The French unhappiness puzzle: The cultural dimension of happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 379-401.
    8. Claudia Senik, 2014. "The French Unhappiness Puzzle: the Cultural Dimension of Happiness," Working Papers halshs-00628837, HAL.
    9. Leonardo Becchetti & Alessandra Pelloni, 2013. "What are we learning from the life satisfaction literature?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(2), pages 113-155, June.
    10. William Betz & Nicole Simpson, 2013. "The effects of international migration on the well-being of native populations in Europe," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-21, December.
    11. Nguyen, Ha & Duncan, Alan, 2015. "Macroeconomic fluctuations in home countries and immigrants’ well-being: New evidence from Down Under," MPRA Paper 69593, University Library of Munich, Germany, revised Feb 2016.
    12. Antje Mertens & Miriam Beblo, 2016. "Self-Reported Satisfaction and the Economic Crisis of 2007–2010: Or How People in the UK and Germany Perceive a Severe Cyclical Downturn," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 125(2), pages 537-565, January.
    13. Odermatt, Reto & Stutzer, Alois, 2017. "Subjective Well-Being and Public Policy," IZA Discussion Papers 11102, Institute of Labor Economics (IZA).
    14. Senik, Claudia, 2009. "Direct evidence on income comparisons and their welfare effects," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 408-424, October.
    15. Guven, Cahit & Senik, Claudia & Stichnoth, Holger, 2012. "You can’t be happier than your wife. Happiness gaps and divorce," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 110-130.
    16. Hajdu, Tamás & Hajdu, Gábor, 2011. "A hasznosság és a relatív jövedelem kapcsolatának vizsgálata magyar adatok segítségével [Examining the relation of utility and relative income using Hungarian data]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 56-73.
    17. O'Donnell, Gus & Oswald, Andrew J., 2015. "National well-being policy and a weighted approach to human feelings," Ecological Economics, Elsevier, vol. 120(C), pages 59-70.
    18. Sarracino, Francesco, 2013. "Determinants of subjective well-being in high and low income countries: Do happiness equations differ across countries?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 42(C), pages 51-66.
    19. Köke, Sonja & Perino, Grischa, 2017. "For "better" or "worse": a direct approach to elicit preference rankings from life-satisfaction data," WiSo-HH Working Paper Series 43, University of Hamburg, Faculty of Business, Economics and Social Sciences, WISO Research Laboratory.
    20. Fabio Sabatini & Francesco Sarracino, 2017. "Online Networks and Subjective Well-Being," Kyklos, Wiley Blackwell, vol. 70(3), pages 456-480, August.

    More about this item

    Keywords

    Eurobarometer; Life satisfaction; Consumer confidence; Financial stability; Central bank;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finsta:v:11:y:2014:i:c:p:82-91. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jfstabil .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.