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The Impact of Credit Constraints, Interest Rates and Housing Equity Withdrawal on the Intertemporal Pattern of Consumption--A Diagrammatic Analysis

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  • Patterson, Kerry D

Abstract

The two period intertemporal model of consumption is extended here to provide some insights into the impact of credit constraints, changes in interest rates and income, and housing equity withdrawal on the intertemporal pattern of consumption. In analyzing the effects of such changes, the author finds it important to draw a distinction between households that have positive or negative net wealth and notes the potentially asymmetric effect of negative and positive increments to income. He views housing equity withdrawal as a rational response to imperfect capital markets. Copyright 1993 by Scottish Economic Society.

Suggested Citation

  • Patterson, Kerry D, 1993. "The Impact of Credit Constraints, Interest Rates and Housing Equity Withdrawal on the Intertemporal Pattern of Consumption--A Diagrammatic Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 40(4), pages 391-407, November.
    • Handle: RePEc:bla:scotjp:v:40:y:1993:i:4:p:391-407
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    Citations

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    Cited by:

    1. Nicholas Apergis & Stephen M. Miller, 2005. "Resurrecting the Wealth Effect on Consumption: Further Analysis and Extension," Working papers 2005-57, University of Connecticut, Department of Economics.
    2. Ingrid Groessl & Ulrich Fritsche, 2006. "The Store-of-Value-Function of Money as a Component of Household Risk Management," Macroeconomics and Finance Series 200606, University of Hamburg, Department of Socioeconomics.
    3. Apergis, Nicholas & Miller, Stephen M., 2006. "Consumption asymmetry and the stock market: Empirical evidence," Economics Letters, Elsevier, vol. 93(3), pages 337-342, December.
    4. Márquez, Elena & Martínez-Cañete, Ana R. & Pérez-Soba, Inés, 2013. "Wealth shocks, credit conditions and asymmetric consumption response: Empirical evidence for the UK," Economic Modelling, Elsevier, vol. 33(C), pages 357-366.
    5. Lo, Kuang-Ta & Chou, Ta-Sheng & Tsui, Stephanie, 2020. "The asymmetric behavior of household consumption under the business cycle," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    6. Neil R. Ericsson, David F. Hendry & Kevin M. Prestiwch, "undated". "The UK Demand for Broad Money over the Long run," Economics Papers W29, Economics Group, Nuffield College, University of Oxford.
    7. Yener Coskun & Nicholas Apergis & Esra Alp Coskun, 2022. "Nonlinear responses of consumption to wealth, income, and interest rate shocks," Empirical Economics, Springer, vol. 63(3), pages 1293-1335, September.
    8. Neil R. Ericsson & David F. Hendry & Kevin M. Prestwich, 1998. "The Demand for Broad Money in the United Kingdom, 1878–1993," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 289-324, March.
    9. Nicholas Apergis & Stephen M. Miller, 2005. "Consumption asymmetry and the stock market: New evidence through a threshold adjustment model," Working papers 2005-08, University of Connecticut, Department of Economics.
    10. Mansor H. Ibrahim & Muzafar Shah Habibullah, 2010. "Stock market and aggregate consumption asymmetry: evidence from Malaysia," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 27(1), pages 19-29, March.
    11. Ramiz Rahmanov, 2014. "Liquidity Constraints, Loss Aversion, and Myopia: Evidence from Central and Eastern European Countries," William Davidson Institute Working Papers Series wp1082, William Davidson Institute at the University of Michigan.
    12. Nicholas Apergis & Stephen M. Miller, 2004. "Consumption Asymmetry and the Stock Market: Further Evidence," Working papers 2004-19, University of Connecticut, Department of Economics.

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