households who are perceived to be richer, on household savings and consumption. When controlling for own income as well as … the German Socio-Economic Panel, we estimate the effect of reference consumption, defined as the consumption level of all … unobserved individual and local area heterogeneity, an increase in reference consumption of 100 euros leads to an increase in …

constraint. Through different channels, IO mortgages thus facilitate consumption smoothing for young and old households. We …