Download or read book Analyzing the Effects of Financial and Housing Wealth on Consumption using Micro Data written by Carlos Caceres and published by International Monetary Fund. This book was released on 2019-05-24 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the existence of “wealth effects” derived from net equity (in the form of housing, financial assets, and total net worth) on consumption. The study uses longitudinal household-level data?from the Panel Study of Income Dynamics (PSID) ?covering about 7,000-9,000 households in the U.S., with the estimations carried over the period 1999-2017. Overall, wealth effects are found to be relatively large and significant for housing wealth, but less so for other types of wealth, including stocks. Furthermore, the analysis shows how these estimated marginal propensities to consume (MPC) from wealth are closely linked to household characteristics, including income and demographic factors. Finally, underlying structural changes in household characteristics point to potentially lower aggregate MPCs from wealth going forward.

Download or read book The Wealth Effects of Housing Assets written by Seog Jun Song and published by . This book was released on 2005 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Wealth Effects Out of Financial and Housing Wealth written by and published by . This book was released on 2006 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study is a contribution to the literature on the link between consumption and wealth (wealth effect). A new source of harmonized micro data (Luxembourg Wealth Study) is used to investigate whether there are differences in wealth effects out of different types of wealth and also across age groups. Three countries are considered: Canada, Italy and Finland.

Download or read book Refining the Wealth Effect written by Christopher Anthony Andia and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we examine the phenomenon known as the wealth effect and its impact on consumption. By using quarterly data from the United States economy, we investigate the impact of financial and housing wealth on consumption. With variable selection based on a paper by Matteo Iacoviello, and expanding the sample size by including the periods from the first quarter of 1952 to the last quarter of 2016, we found evidence that shows both financial wealth and housing wealth have an impact on consumption. Although the data specifically shows housing wealth had a higher impact, the final results seemed to be somewhat inconclusive because each method of integration had a slightly different outcome. In our basic model using the OLS method of integration consistently showed housing wealth had a larger impact on consumption, while the results of the ARDL and Co-integration estimates varied. These results are in agreement with some of the literature but do not include some of the micro economic variables that might have made the results more conclusive. Finally, we take a look at some of the implications of the wealth effect and how they go past just an increase in consumption.

Download or read book How Do House Prices Affect Consumption written by John Y. Campbell and published by . This book was released on 2005 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Housing is a major component of wealth. Since house prices fluctuate considerably over time, it is important to understand how these fluctuations affect households' consumption decisions. Rising house prices may stimulate consumption by increasing households' perceived wealth, or by relaxing borrowing constraints. This paper investigates the response of household consumption to house prices using UK micro data. We estimate the largest effect of house prices on consumption for older homeowners, and the smallest effect, insignificantly different from zero, for younger renters. This finding is consistent with heterogeneity in the wealth effect across these groups. In addition, we find that regional house prices affect regional consumption growth. Predictable changes in house prices are correlated with predictable changes in consumption, particularly for households that are more likely to be borrowing constrained, but this effect is driven by national rather than regional house prices and is important for renters as well as homeowners, suggesting that UK house prices are correlated with aggregate financial market conditions"--National Bureau of Economic Research web site.

Download or read book Wealth Effects Revisited 1978 2009 written by Karl E. Case and published by . This book was released on 2011 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We re-examine the link between changes in housing wealth, financial wealth, and consumer spending. We extend a panel of U.S. states observed quarterly during the seventeen-year period, 1982 through 1999, to the thirty-one year period, 1978 through 2009. Using techniques reported previously, we impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regression models in levels, first differences and in error-correction form, relating per capita consumption to per capita income and wealth. We find a statistically significant and rather large effect of housing wealth upon household consumption. This effect is consistently larger than the effect of stock market wealth upon consumption. This reinforces the conclusions reported in our previous analysis. In contrast to our previous analysis, however, we do find -- based on data which include the recent volatility in asset markets -- that the effects of declines in housing wealth in reducing consumption are at least as large as the effects of increases in housing wealth in increasing the course of household consumption.

Download or read book Wealth Effects on Consumption written by Olympia Bover and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Estimates housing wealth effects using the new survey of Spanish Household Finances which contains information on different types of wealth and expenditure, and oversamples wealthy households. Using local house prices and inheritance information from the survey as instruments, identifies a causal effect of housing wealth on consumption.

Download or read book Housing Wealth Financial Wealth and Consumption Expenditure written by Hassan Gholipour Fereidouni and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this paper is to examine the role of consumer confidence on the relationship between two forms of wealth - housing and financial - and four categories of consumption expenditure. which include total consumption, service, durable goods and nondurable goods consumption. This paper uses U.S. quarterly data from 1978 to 2012 for its analysis. Applying the FMOLS estimation method, the results show that consumer confidence has a positive effect on the association between housing wealth and consumption expenditure, whereas its effect on the association between financial wealth and consumption expenditure is negative. The implications of these results are discussed.

Download or read book How Large is the Housing Wealth Effect written by Chris Carroll and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a simple new method for estimating the size of 'wealth effects' on aggregate consumption. The method exploits the well-documented sluggishness of consumption growth (often interpreted as 'habits' in the asset pricing literature) to distinguish between short-run and long-run wealth effects. In U.S. data, we estimate that the immediate (next-quarter) marginal propensity to consume from a $1 change in housing wealth is about 2 cents, with a final long-run effect around 9 cents. Consistent with several recent studies, we find a housing wealth effect that is substantially larger than the stock wealth effect. We believe that our approach is preferable to the currently popular cointegration- based estimation methods, because neither theory nor evidence justifies faith in the existence of a stable cointegrating vector.

Download or read book Wealth Effects and Macroeconomic Dynamics Evidence from Indian Economy written by Vighneswara Swamy and published by . This book was released on 2017 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: The wealth effects on consumption are a subject of continuing interest to economists. The conventional wisdom states that fluctuations in household wealth have caused major fluctuations in economic activity. This study analyses the macroeconomic dynamics of wealth effects in India and examines the nexus between the changes in housing wealth, financial wealth, and consumer spending. Using the quarterly data for the period 2005:1-2016:1, I estimate vector autoregression models and vector error-correction models, relating consumption to income and wealth measures. I find a statistically significant and rather large effect of housing wealth upon household consumption. The results show that (i) wealth effects are statistically significant and comparatively substantial in magnitude (ii) housing wealth effects tend to be greater while stock market wealth effects are considerable (iii) private consumption responses to the shocks to housing market wealth are relatively stronger than to the shocks in stock market wealth. There is a bidirectional causality running from private consumption to the two wealth forms and vice versa. Overall, the private consumption expenditure response to the changes in different wealth forms is observed to be substantial and significant.

Download or read book Feeling Rich Feeling Poor Housing Wealth Effects and Consumption in Europe written by Mr. Serhan Cevik and published by International Monetary Fund. This book was released on 2023-12-08 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: Households across Europe are struggling with a double crisis—the worst inflation shock since the World War II and a sudden correction in house prices. There is a rich literature on how housing price cycles affect consumer spending, finding mixed results with a wide range of consumption responses to changes in housing wealth. In this paper, using quarterly data on 20 countries in Europe over the period 1980–2023, we analyze the dynamic relationship between inflation-adjusted housing wealth and consumer spending and obtain statistically significant and economically intuitive results. Household consumption responds positively and swiftly to changes in real house prices and gross disposable income as expected. Using the estimated coefficients, we can deduce that the average quarter-on-quarter decline of -1.96 percent in real house prices in the first quarter of 2023 in Europe could dampen consumer spending by about -0.51 percentage points in real terms on a cumulative basis over a horizon of eight quarters.

Download or read book Housing Wealth and Consumption written by S. Borağan Aruoba and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We quantify the role of heterogeneity in households' financial constraints in explaining the large decline in consumption between 2006 and 2009. Using household-level data, we show that in addition to a direct effect of changes in house prices, there are sizable indirect effects from general equilibrium feedback and bank health. About 60% of the aggregate response of consumption to changes in house prices is explained by ex-ante and ex-post financial constraints, where only a specific set of households face binding ex-post financial constraints as a result of declining house prices. We find a negligible wealth effect once we account for the role of heterogonous financial constraints.

Download or read book The mythical housing wealth effect written by Charles W. Calomiris and published by . This book was released on 2009 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Models used to guide policy, as well as some empirical studies, suggest that the effect of housing wealth on consumption is large and greater than the wealth effect on consumption from stock holdings. Recent theoretical work, in contrast, argues that changes in housing wealth are offset by changes in housing consumption, meaning that unexpected shocks in housing wealth should have little effect on non-housing consumption. We reexamine the impact of housing wealth on non-housing consumption, employing the Case-Quigley-Shiller data on U.S. housing wealth that have been used in prior studies to estimate a large housing wealth effect. Existing empirical work fails to control for the fact that changes in housing wealth may be correlated with changes in expected permanent income, biasing the resulting estimates. Once we control for the endogeneity bias resulting from the correlation between housing wealth and permanent income, we find that housing wealth has a small and insignificant effect on consumption. Additional analysis of time-series results provides further support for that view.

Download or read book Comparing Wealth Effects written by Karl E. Case and published by . This book was released on 2001 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of U.S. states observed quarterly during the 1980s and 1990s. We impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regressions relating consumption to income and wealth measures, finding a statistically significant and rather large effect of housing wealth upon household consumption

Download or read book Financial Market and Housing Wealth Effects on Consumption written by Arnold C S. Cheng and published by . This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this study is to examine the financial market and housing wealth effects on consumption. Housing has the dual functions as both a commodity yielding a flow of housing services and an investment asset yielding a flow of capital income. The findings from this study suggest that a rise in housing price has both a positive wealth effect and a negative price effect on consumption. While the positive wealth effect is caused by an increase in capital income, the negative price effect is caused by an increase in the cost of housing services. In addition, the housing market wealth effect increases, at the expense of the price effect, with the levels of leverage and homeownership of the housing market. These findings imply that the government policy of land supply aiming to stimulate the economy should strike a balance between the possible wealth and price effects of the housing market.

Download or read book Wealth Effects on Consumption Plans written by Luc Arrondel and published by . This book was released on 2015 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the wealth effect on consumption in France by relying on two original household surveys. First, it provides the first estimate of the marginal propensity to consume out of wealth based on micro data for France (Enquête Patrimoine 2009, Insee): a low but significant wealth effect is obtained and financial wealth seems to be significant only for stockholders. Second, it studies how French households have adapted their consumption plans during the 2008-2009 crisis by relying on household self-assessed changes in future consumption (survey PATER). Besides the direct wealth effect, our results confirm the role played by changes in expectations on consumption plans, and thus, by the confidence channel as an additional transmission mechanism of the crisis.

Download or read book How Large are Housing and Financial Wealth Effects A New Approach written by Christopher D. Carroll and published by . This book was released on 2015 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a simple new method for measuring 'wealth effects' on aggregate consumption. The method exploits the stickiness of consumption growth (sometimes interpreted as reflecting consumption 'habits') to distinguish between immediate and eventual wealth effects. In U.S. data, we estimate that the immediate (next-quarter) marginal propensity to consume from a $1 change in housing wealth is about 2 cents, with a final eventual effect around 9 cents, substantially larger than the effect of shocks to financial wealth. We argue that our method is preferable to cointegration-based approaches, because neither theory nor evidence supports faith in the existence of a stable cointegrating vector.