IDEAS home Printed from https://ideas.repec.org/p/cwl/cwldpp/1459.html
   My bibliography  Save this paper

Household Reaction to Changes in Housing Wealth

Author

Abstract

It is widely claimed that housing wealth, as well as stock prices, have an impact on consumption and hence on aggregate economic activity. This paper presents a broad overview of the issues that arise in evaluating this claim in the context of recent research in behavioral economics. Particular attention is paid to a model of the response of consumption to wealth components produced by Christopher Carroll [2004].

Suggested Citation

  • Robert J. Shiller, 2004. "Household Reaction to Changes in Housing Wealth," Cowles Foundation Discussion Papers 1459, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1459
    as

    Download full text from publisher

    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d14/d1459.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 164-187, February.
    3. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
    4. Angus Deaton & Christina Paxson, 1997. "The effects of economic and population growth on national saving and inequality," Demography, Springer;Population Association of America (PAA), vol. 34(1), pages 97-114, February.
    5. Richard H. Thaler, 2017. "Behavioral Economics," Journal of Political Economy, University of Chicago Press, vol. 125(6), pages 1799-1805.
    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. Chen, Jie, 2006. "Housing Wealth and Aggregate Consumption in Sweden," Working Paper Series 2006:16, Uppsala University, Department of Economics.
    2. Amy Crews Cutts & Frank E. Nothaft, 2005. "Reversion to the Mean Versus Sticking to Fundamentals: Looking to the Next Five Years of Housing Price Growth," NFI Policy Briefs 2005-PB-03, Indiana State University, Scott College of Business, Networks Financial Institute.
    3. Chen, Jie, 2006. "Re-evaluating the association between housing wealth and aggregate consumption: New evidence from Sweden," Journal of Housing Economics, Elsevier, vol. 15(4), pages 321-348, December.
    4. Caliendo, Frank & Huang, Kevin X.D., 2008. "Overconfidence and consumption over the life cycle," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1347-1369, December.
    5. Dimitri B. Papadimitriou & Greg Hannsgen & Gennaro Zezza, 2007. "Cracks in the Foundations of Growth: What Will the Housing Debacle Mean for the U.S. Economy?," Economics Public Policy Brief Archive ppb_90, Levy Economics Institute.

    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. Philippe Fevrier & Sebastien Gay, 2005. "Informed Consent Versus Presumed Consent The Role of the Family in Organ Donations," HEW 0509007, University Library of Munich, Germany.
    2. Marianne Bertrand & Dean S. Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," Working Papers 918, Economic Growth Center, Yale University.
    3. Janine Aron & John Muellbauer, 2006. "Housing Wealth, Credit Conditions and Consumption," CSAE Working Paper Series 2006-08, Centre for the Study of African Economies, University of Oxford.
    4. Christopher D. Carroll & Misuzu Otsuka & Jirka Slacalek, 2006. "How Large Is the Housing Wealth Effect? A New Approach," NBER Working Papers 12746, National Bureau of Economic Research, Inc.
    5. Jawwad Noor, 2005. "Temptation, Welfare and Revealed Preference," Boston University - Department of Economics - Working Papers Series WP2005-15, Boston University - Department of Economics.
    6. Orazio P. Attanasio & Laura Blow & Robert Hamilton & Andrew Leicester, 2009. "Booms and Busts: Consumption, House Prices and Expectations," Economica, London School of Economics and Political Science, vol. 76(301), pages 20-50, February.
    7. Ansgar Belke & Christian Dreger & Richard Ochmann, 2015. "Do wealthier households save more? The impact of the demographic factor," International Economics and Economic Policy, Springer, vol. 12(2), pages 163-173, June.
    8. Malte Dold, 2023. "Behavioural normative economics: foundations, approaches and trends," Fiscal Studies, John Wiley & Sons, vol. 44(2), pages 137-150, June.
    9. Dalina Amonhaemanon, 2015. "The Impact of Stock Price and Real Estate Price Shocks on Consumption: The Thai Experience," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(1), pages 137-148, January.
    10. Caliendo, Frank & Aadland, David, 2007. "Short-term planning and the life-cycle consumption puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1392-1415, April.
    11. Orazio P. Attanasio & Guglielmo Weber, 2010. "Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 693-751, September.
    12. Gerlinde Fellner & Matthias Sutter, 2009. "Causes, Consequences, and Cures of Myopic Loss Aversion – An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 119(537), pages 900-916, April.
    13. Kwan, Yum K. & Leung, Charles Ka Yui & Dong, Jinyue, 2015. "Comparing consumption-based asset pricing models: The case of an Asian city," Journal of Housing Economics, Elsevier, vol. 28(C), pages 18-41.
    14. James J. Choi & David Laibson & Brigitte C. Madrian, 2011. "$100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 748-763, August.
    15. Luis Miguel Pacheco & Jose Martins Barata, 2005. "Residential and Stock Market Effects on Consumption across Europe," International Journal of Housing Policy, Taylor & Francis Journals, vol. 5(3), pages 255-278.
    16. Campbell, John Y. & Cocco, Joao F., 2007. "How do house prices affect consumption? Evidence from micro data," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 591-621, April.
    17. Juan Camilo Cardenas & Jeffrey P. Carpenter, 2005. "Experiments and Economic Development: Lessons from Field Labs in the Developing World," Middlebury College Working Paper Series 0505, Middlebury College, Department of Economics.
    18. Chen, Nan-Kuang & Chen, Shiu-Sheng & Chou, Yu-Hsi, 2010. "House prices, collateral constraint, and the asymmetric effect on consumption," Journal of Housing Economics, Elsevier, vol. 19(1), pages 26-37, March.
    19. Zhou Xia & Carroll Christopher D., 2012. "Dynamics of Wealth and Consumption: New and Improved Measures for U.S. States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(2), pages 1-44, March.
    20. Sousa, Ricardo M., 2009. "Wealth effects on consumption: evidence from the euro area," Working Paper Series 1050, European Central Bank.

    More about this item

    Keywords

    Wealth effect; Home prices; Stock prices; Consumption; Saving; Life cycle theory; Interest rates; Inflation; bubble;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cwl:cwldpp:1459. 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: Brittany Ladd (email available below). General contact details of provider: https://edirc.repec.org/data/cowleus.html .

    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.