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

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  • Mauro Mastrogiacomo
  • R.P. Berben
  • K. Bernoth

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. 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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  • Mauro Mastrogiacomo & R.P. Berben & K. Bernoth, 2006. "Households' response to wealth changes; do gains or losses make a difference," CPB Discussion Paper 63, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:63
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    Cited by:

    1. Mauro Mastrogiacomo & Rob Alessie, 2015. "Where are the retirement savings of self-employed? An analysis of 'unconventional' retirement accounts," DNB Working Papers 454, Netherlands Central Bank, Research Department.
    2. Horag Choi & Nelson C. Mark, 2009. "Trending Current Accounts," NBER Working Papers 15244, National Bureau of Economic Research, Inc.
    3. International Monetary Fund, 2006. "Kingdom of the Netherlands—Netherlands: Selected Issues," IMF Staff Country Reports 2006/284, International Monetary Fund.
    4. Wim Suyker, 2006. "Nuancing the favourable assessments of the Nordic economies," CPB Memorandum 153, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
    6. Mauro Mastrogiacomo & Rob Alessie, 2011. "Did you really save so little for your retirement? An analysis of retirement savings and unconventional retirement accounts," CPB Discussion Paper 200, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland, Institute for Economies in Transition.
    8. Petra Gerlach-Kristen & Rossana Merola, 2019. "Consumption and credit constraints: a model and evidence from Ireland," Empirical Economics, Springer, vol. 57(2), pages 475-503, August.
    9. Mark van Duijn & Maarten Lindeboom & Mauro Mastrogiacomo & M. Lundborg, 2009. "Pension plans and the retirement replacement rates in the Netherlands," CPB Discussion Paper 118, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Iulia Siedschlag, 2008. "Macroeconomic Differentials and Adjustment in the Euro Area," SUERF Studies, SUERF - The European Money and Finance Forum, number 2008/3 edited by Morten Balling, May.
    11. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland Institute for Emerging Economies (BOFIT).
    12. Atalay, Kadir & Whelan, Stephen & Yates, Judith, 2013. "Housing Wealth and Household Consumption: New Evidence from Australia and Canada," Working Papers 2013-04, University of Sydney, School of Economics.
    13. Eurosystem Household Finance and Consumption Network, 2013. "The Eurosystem Household Finance and Consumption Survey - Methodological report," Statistics Paper Series 1, European Central Bank.
    14. Aboohamidi, Abbas & Chidmi, Benaissa, 2015. "Changes in the Wealth of American Households during the 2007-2009 Financial Crisis in the U.S," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205451, Agricultural and Applied Economics Association.
    15. Kadir Atalay & Stephen Whelan & Judith Yates, 2016. "House Prices, Wealth and Consumption: New Evidence from Australia and Canada," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(1), pages 69-91, March.
    16. José Alves & Tomás Silva, 2021. "An Empirical Assessment of Monetary Policy Channels in Income and Wealth Disparities," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(3), pages 432-449, September.
    17. repec:zbw:bofitp:2011_007 is not listed on IDEAS
    18. Mauro Mastrogiacomo, 2010. "Testing Consumers' Asymmetric Perception Of Changes In Household Financial Situation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(2), pages 327-350, June.
    19. Dnb, 2011. "DELFI : DNB's Macroeconomic Policy Model of the Netherlands," DNB Occasional Studies 901, Netherlands Central Bank, Research Department.
    20. Barrett, Alan & Bergin, Adele & FitzGerald, John & Traistaru-Siedschlag, Iulia, 2006. "Economic Assessment of the Euro Area: Forecasts and Policy Analysis, Autumn Report 2006," Research Series, Economic and Social Research Institute (ESRI), number sustat22.
    21. Henk Kranendonk & Johan Verbruggen, 2007. "SAFFIER; a multi-purpose model of the Dutch economy for short-term and medium-term analyses," CPB Document 144, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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