The impact of unanticipated wealth effects on consumption: evidence from Spanish panel data

Abstract

Purpose The purpose of this study is to estimate the housing wealth effect on non-durable consumption using data from the Spanish Survey of Household Finances (Encuesta Financiera de las Familias, SHF) for the period 2002–2017. Design/methodology/approach The authors aim at identifying the effect of anticipated and unanticipated housing wealth changes on consumption with the sample of homeowners, following Paiella and Pistaferri (2017). Findings Results of this study lead us to conclude that there exists a strong housing wealth effect on consumption for the Spanish households. Originality/value The authors provide evidence against the permanent income model. They also analyse how the results change with income expectations, age and the household indebtedness rate. Finally, they detect a strong excess sensitivity to income.