Portfolio Flows and Household Portfolios

In this paper, we show that cross-border portfolio flows around the peak of the European Crisis induced households to rebalance their portfolios toward housing.Estimating difference-indifferences regressions around Draghi's "Whatever It Take" speech in July 2012 with household data from the ECB's Household Finance and Consumption Survey, we find that portfolio inflows induce households with larger ex-ante bond and equity shares to rebalance more strongly toward housing.The effect is not driven by higher pre-treatment access to credit or higher credit growth during the treatment period and is stronger for wealthier and less risk-averse households.