Published in:De Nederlandsche Bank Working Paper ; No. 713
Extent:
1 Online-Ressource (22 p)
Language:
English
DOI:
10.2139/ssrn.3859239
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 25, 2021 erstellt
Description:
This paper tests whether disregarding home-improvements biases the housing wealth effect, the marginal propensity to consume out of housing wealth. The housing wealth effect is decomposed in its endogenous and exogenous component by filtering out previously stated expectations of house prices and accounting for endogenous home improvements.Results of the empirical analysis show that the size of the bias is zero, due to the zero correlation between home-investments and changes in house values. Our results are consistent with a lifecycle model with exogenous home improvements. The use of a comparative empirical approach excludes that these are only internally valid