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The housing net worth channel and the public finances: evidence from a European country panel

Author

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  • David Cronin

    (Central Bank of Ireland)

  • Kieran McQuinn

    (Central Bank of Ireland)

Abstract

In the growing literature on the importance of household balance sheets to macroeconomic developments, the relationship between housing wealth and fiscal outturns needs consideration given the likely links between housing market developments and particular tax headings. We adopt the housing net worth model for this purpose. Using a panel dataset of 18 European countries over the period 1998 to 2017, we find changes in housing net worth having a significant impact on the primary budget balance, with increases (decreases) in housing net worth causing the budget balance to improve (dis-improve). Further support for the importance of this channel to the public finances arises by differentiating observations based on the amount of revenue raised under particular tax headings.

Suggested Citation

  • David Cronin & Kieran McQuinn, 2023. "The housing net worth channel and the public finances: evidence from a European country panel," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(5), pages 1251-1265, October.
    • Handle: RePEc:kap:itaxpf:v:30:y:2023:i:5:d:10.1007_s10797-022-09751-z
    DOI: 10.1007/s10797-022-09751-z
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    Cited by:

    1. Tianbao Zhou & Zhixin Liu & Yingying Xu, 2024. "Characterizing Public Debt Cycles: Don't Ignore the Impact of Financial Cycles," Papers 2404.17412, arXiv.org.

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    More about this item

    Keywords

    Housing wealth; House prices; Government budget balance;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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