What Do 12 Billion Card Transactions Say About House Prices and Consumption?

(joint with K. Aastveit, J. Böjeryd, M. Gullbrandsen and K. Roszbach)

Abstract:

Changes in house prices can drive consumption, investment and the economy at large. Using close to the Universe of debit card and electronic invoice payment data linked with relevant administrative background data for Norway, we estimate the dynamic response of consumption to a regional house price shock generated by the 2014-15 oil price decline. We isolate the effect of housing wealth by exploiting regional variation in 
exposure to the oil sector and studying government workers who face no change in unemployment or income risk and have stable and centrally determined wages. Our findings provide new evidence on the dynamics and the mechanisms through which house price shocks translate to changes in consumption. We estimate that a $1 drop in housing wealth causes an average decline in expenditures of $0.036 over a 3-year period. We 
find substantial heterogeneity across consumption components and population groups. Spending on durable goods such as cars, furnishing and home improvements respond strongest while spending on semi-durable goods, such as clothing, are less affected. Both tradable and non-tradable goods are affected. Consistent with housing playing a role as collateral, the response of consumption increases with household leverage and
decreases in liquidity and age.