House Price Shocks, Negative Equity and Household Consumption in the UK in the 1990s

Andrew Gordon Henley, Richard Disney, David Jevons

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Abstract

We examine the impact of housing capital gains on savings behaviour during the 1990s British housing market cycle using microdata from the British Household Panel Survey and county-level house price data. We condition the models on household real financial capital gains using Family Resources Survey data. We find a marginal propensity to consume out of housing wealth of between 0.01 and 0.03, depending on specification. Among our novel findings are asymmetric behaviour between periods of house price rises and falls, with stronger consumption response during periods of house price increases, and a disproportionate impact on saving if the household has negative housing equity.
Original languageEnglish
Publication statusPublished - Mar 2002
EventRoyal Economic Society Annual Conference 2002 - Warwick, United Kingdom of Great Britain and Northern Ireland
Duration: 25 Mar 200227 Mar 2002

Conference

ConferenceRoyal Economic Society Annual Conference 2002
Country/TerritoryUnited Kingdom of Great Britain and Northern Ireland
CityWarwick
Period25 Mar 200227 Mar 2002

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