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Comparing Wealth Effects: The Stock Market versus the Housing Market

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Author Info
Karl Case (Wellesley College)
John Quigley (University of California, Berkeley)
Robert Shiller (Yale University)

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Abstract

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 regression models in levels, first differences and in error-correction form, relating consumption to income and wealth measures. We find a statistically significant and rather large effect of housing wealth upon household consumption.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Advances in Macroeconomics.

Volume (Year): 5 (2005)
Issue (Month): 1 ()
Pages: 1235-1235
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Handle: RePEc:bep:macadv:v:5:y:2005:i:1:p:1235-1235

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Related research
Keywords: consumption nonfinancial wealth housing market real estate

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Find related papers by JEL classification:
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment

References listed on IDEAS
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    Other versions:
  3. Englund, Peter & Ioannides, Yannis M., 1997. "House Price Dynamics: An International Empirical Perspective," Journal of Housing Economics, Elsevier, vol. 6(2), pages 119-136, June. [Downloadable!] (restricted)
    Other versions:
  4. Sheiner Louise, 1995. "Housing Prices and the Savings of Renters," Journal of Urban Economics, Elsevier, vol. 38(1), pages 94-125, July. [Downloadable!] (restricted)
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    Other versions:
  13. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I. [Downloadable!] (restricted)
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    Other versions:
  16. John Y. Campbell & Joao F. Cocco, 2004. "How Do House Prices Affect Consumption? Evidence From Micro F. Data," Harvard Institute of Economic Research Working Papers 2045, Harvard - Institute of Economic Research. [Downloadable!]
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  17. Todd Sinai & Nicholas S. Souleles, 2003. "Owner-Occupied Housing as a Hedge Against Rent Risk," NBER Working Papers 9462, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  18. Yoshikawa, Hiroshi & Ohtaka, Fumio, 1989. "An analysis of female labor supply, housing demand and the saving rate in Japan," European Economic Review, Elsevier, vol. 33(5), pages 997-1023, May. [Downloadable!] (restricted)
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  23. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March. [Downloadable!] (restricted)
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  27. Levin, Laurence, 1998. "Are assets fungible?: Testing the behavioral theory of life-cycle savings," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 59-83, July. [Downloadable!] (restricted)
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