We study whether the level of household indebtedness is related to the interest rate elasticity of private consumption …. Looking at Finnish aggregate data, we find no robust evidence of increased interest rate elasticity of private consumption … even as the household sector's debt-to-income ratio has almost doubled in the past 20 years. Estimates based on the …

We set up and solve a rich life-cycle model of household decisions involving consumption of both perishable goods and …, and portfolio constraints. The model features habit formation for housing consumption, which leads to optimal decisions …) that perishable consumption is more sensitive to wealth and income shocks than housing consumption, and (iv) that non …