The paper investigates the relationship between changes in asset wealth and the trend movements of household consumption in urban China. Using the vector error correction cointegration model, we demonstrate that there is a unique long-run cointegrating relationship between household consumption, disposable income, financial wealth and housing wealth in urban China. We find that housing wealth is the only factor that restores the long-run equilibrium relationship when the cointegrated system is disturbed by an external shock. In addition, our permanent-transitory variance decomposition analysis indicates that nearly all variance in the movement of consumption is permanent, supporting the classical random walk hypothesis of consumption behavior. However, a large proportion of variance in the short-run movements of housing wealth is found to be transitory. Copyright (c) 2009 The Authors Journal compilation (c) 2009 Institute of World Economics and Politics, Chinese Academy of Social Sciences.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Article provided by Institute of World Economics and Politics, Chinese Academy of Social Sciences in its journal China & World Economy.
Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 210000 papers.