The response of Australian consumption to housing wealth
Large variations in house prices can lead to significant changes in the level of household wealth and this may affect household consumption. Using Lettau and Ludvigson's [Lettau, M., Ludvigson, S.C., 2004. Understanding trend and cycle in asset values: reevaluating the wealth effect on consumption. American Economic Review 94, 276-299] cointegration approach, we investigate the response of non-housing consumption to permanent and transitory changes in financial and non-financial (housing) wealth in Australia since the mid-1970s. The data provide evidence that housing wealth contains a large transitory component, but up to 2004 at least, these transitory changes in wealth are not associated with any significant response in consumption. When post-2004 data are included in the estimation, there is some evidence that household consumption responds to recent transitory rises in wealth and labor income. However this finding needs to be weighed against weaker evidence of a cointegrating relationship for consumption, income and wealth.
Year of publication: |
2010
|
---|---|
Authors: | Fisher, Lance A. ; Otto, Glenn ; Voss, Graham M. |
Published in: |
Journal of Macroeconomics. - Elsevier, ISSN 0164-0704. - Vol. 32.2010, 1, p. 284-299
|
Publisher: |
Elsevier |
Keywords: | Consumption Wealth Housing wealth Cointegration Permanent and transitory shocks |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
The response of Australian consumption to housing wealth
Fisher, Lance A., (2010)
-
Australian business cycle facts
Fisher, Lance A., (1996)
-
Bank mergers, branch networks and economic growth: Theory and evidence from Canada, 1889–1926
Fisher, Lance A., (2010)
- More ...