What Drives Personal Consumption? The Role of Housing and Financial Wealth

By Jiří Slačálek. Social Science Research Network, 2009

212 citations recorded by the source corpus.

I investigate the effect of wealth on consumption in a new dataset with financial and housing wealth from 16 countries. The baseline estimation method based on the sluggishness of consumption growth implies that the eventual (long-run) marginal propensity to consume out of total wealth is 5 cents (averaged across countries). While the wealth effects are quite strong--between 4 and 6 cents--in countries with more developed mortgage markets and in market-based, Anglo-Saxon and non euro area economies, consumption only barely reacts to wealth elsewhere. The effect of housing wealth is somewhat smaller than that of financial wealth for most countries, but not for the U.S. and the UK. The housing wealth effect has risen substantially after 1988 as it has become easier to borrow against housing wealth.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/c899425d98817d06fc234e9ebbfa603435bdd4a3

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Citations in the corpus

CREDIT, HOUSING COLLATERAL, AND CONSUMPTION: EVIDENCE FROM JAPAN, THE U.K., AND THE U.S. (2012, background): “For example, an important paper by Slacalek (2009) presents estimates of housing “wealth” or collateral effects on consumption for a range of countries, using a different methodology to ours.”
House Prices and the Stance of Monetary Policy (2008, methodology): “For example, Carroll, Otsuka, and Slacalek (2006) estimate that the long-run marginal propensity to consume out of a dollar increase in housing is 9 cents, compared with 4 cents for non-housing wealth.”
How Large are Housing and Financial Wealth Effects? A New Approach (2011, background): “5See Rudd and Whelan (2006) and Slacalek (2009) for empirical evidence of instability in the cointegrating vector.”
Housing markets and the financial crisis of 2007-2009: lessons for the future (2010, background): “Consistent with the collateral view, estimated effects of housing wealth on non-housing consumption vary across countries, largely in accord with differences in the ability to borrow against housing wealth (see Catte, 2004 and Slacalek, 2009).”
Debt-driven growth? Wealth, distribution and demand in OECD countries (2016, background): “In the basic formulations either financial wealth, housing wealth and debt or share and property prices are added to standard control variables (Girouard et al. 2006; Ludwig and Sløk 2004; Slacalek 2009).”
Demographic Structure and Macroeconomic Trends (2019, unknown): “The data for this was taken from Slacalek (2009) and was only available for a sub-sample of the data we use.”
Precautionary Savings in the Great Recession (2012, background): “———, and Jiri Slacalek, 2009, “The American Consumer: Reforming, or just Resting?” http://econ.jhu.edu/people/ccarroll/papers/ReformingOrResting.pdf.”
Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis (2009, background): “10 For a sample of OECD countries, Slacalek (2006) gives mean ratios of housing wealth to”
The effects of financial and real wealth on consumption: new evidence from OECD countries (2012, background): “For a panel of 16 major industrial countries, Slacalek ( 2009 ) estimated a long-run marginal propensity to consume out of total wealth averaged across countries of around 5 cents.”
THE MACROECONOMICS OF SHADOW BANKING (2018, background): “8 and of wealth effects as relevant forces behind increasing consumption expenditures in some European countries (Slacalek, 2009; Stockhammer and Wildauer, 2016).”