Residential and stock market effects on consumption across Europe.
Date
2005
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Coadvisor
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Language
English
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Abstract
The aim of this paper is to explain private consumption as a function of income
and wealth with data from European Union countries. To examine how the developments in
housing and stock markets may have affected consumption behaviour, we adopt two econo-
metric procedures. First, we use the Stock–Watson procedure to account for wealth effects on
consumption over the long run. Second, through an error-correction model we measure wealth
effects on consumption over the short run. We found significant albeit mixed values for the
long-run elasticities of consumption with respect to real residential and equity prices. We also
found strong evidence that consumption exhibits error-correction behaviour in the short run,
with the value of the error-correction term signifying that household consumption takes several
quarters to completely respond to changes in the markets.
Keywords
Housing prices, Asset prices, Wealth effects, Consumption, European Union, Dynamic ordinary least squares, Error-correction models
Document Type
Journal article
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Dataset
Citation
Pacheco, L.M., & Barata, J.M. (2005). Residential and stock market effects on consumption across Europe. International Journal of Housing Policy, 5 (3), 255-278. DOI: 10.1080/14616710500342150.
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Access Type
Open Access