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This paper uses the large and heterogeneous house price shocks in Denmark from 2006-2009 to provide new evidence on the contested determinants of the correlation between house prices and saving. Crucially, to compare the savings behaviour of home-owners who experienced different house price shocks but similar shocks to income expectations, we exploit the structure of the wage setting process in the Danish public sector. We find strong evidence of a causal link between changes in house prices and saving for young and old home-owners, both through a direct wealth effect and through housing equity serving as collateral or precautionary wealth.
Authors
William Elming
Andreas Ermler
Working Paper details
- DOI
- 10.1920/wp.ifs.2016.1612
- Publisher
- IFS
Suggested citation
Elming, W and Ermler, A. (2016). Housing equity, saving and debt dynamics over the Great Recession. London: IFS. Available at: https://ifs.org.uk/publications/housing-equity-saving-and-debt-dynamics-over-great-recession (accessed: 18 April 2024).
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