The present paper investigates the relationship between consumption, labour income and household wealth in Australia within the inter-temporal consumption framework developed by Lettau and Ludvigson (2001). We first test for a long-run relationship among these series and then investigate whether...

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...