% WARNING: This file may contain UTF-8 (unicode) characters.
% While non-8-bit characters are officially unsupported in BibTeX, you
% can use them with the biber backend of biblatex
%    usepackage[backend=biber]{biblatex}

@techreport{NBERw21667,
 title = "House Prices and Consumer Spending",
 author = "Berger, David and Guerrieri, Veronica and Lorenzoni, Guido and Vavra, Joseph",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "21667",
 year = "2015",
 month = "October",
 doi = {10.3386/w21667},
 URL = "http://www.nber.org/papers/w21667",
 abstract = {Recent empirical work shows large consumption responses to house price movements. This is at odds with a prominent theoretical view which, using the logic of the permanent income hypothesis, argues that consumption responses should be small. We show that, in contrast to this view, workhorse models of consumption with incomplete markets calibrated to rich cross-sectional micro facts actually predict large consumption responses, in line with the data. To explain this result, we show that consumption responses to permanent house price shocks can be approximated by a simple and robust rule-of-thumb formula: the marginal propensity to consume out of temporary income times the value of housing. In our model, consumption responses depend on a number of factors such as the level and distribution of debt, the size and history of house price shocks, and the level of credit supply. Each of these effects is naturally explained with our simple formula. },
}