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Dynamics of Wealth and Consumption: New and Improved Measures for U.S. States

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  • Zhou Xia

    (Fannie Mae)

  • Carroll Christopher D.

    (Johns Hopkins University)

Abstract

Case, Quigley, and Shiller (2005) persuasively argue that the well-known conceptual difficulties in measuring aggregate “wealth effects” might be lessened by the use of state-level data. Unfortunately, the data required for a convincing implementation of their idea have been either virtually nonexistent (for financial wealth) or of questionable quality (for consumption). Our main contributions are to provide the first directly observed panel data on financial wealth at the state level, and to construct improved measures of state-level spending growth. Using these data, we estimate rudimentary “wealth effects” regressions that find a strong relationship between twice-lagged housing wealth growth and current spending growth, but we find no relationship between lagged financial wealth growth and current spending growth.

Suggested Citation

  • Zhou Xia & Carroll Christopher D., 2012. "Dynamics of Wealth and Consumption: New and Improved Measures for U.S. States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(2), pages 1-44, March.
    • Handle: RePEc:bpj:bejmac:v:12:y:2012:i:2:n:4
    DOI: 10.1515/1935-1690.2403
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    Cited by:

    1. Beatrice D. Simo-Kengne & Stephen M. Miller & Rangan Gupta & Goodness C. Aye, 2013. "Time-Varying Effects of Housing and Stock Prices on U.S. Consumption," Working Papers 201325, University of Pretoria, Department of Economics.
    2. Charles Ka Yui Leung & Joe Cho Yiu Ng, 2018. "Macro Aspects of Housing," GRU Working Paper Series GRU_2018_016, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    3. Vasilios Plakandaras & Rangan Gupta & Constantinos Katrakilidis & Mark E. Wohar, 2020. "Time-varying role of macroeconomic shocks on house prices in the US and UK: evidence from over 150 years of data," Empirical Economics, Springer, vol. 58(5), pages 2249-2285, May.
    4. Bruno Albuquerque & Georgi Krustev, 2018. "Debt Overhang and Deleveraging in the US Household Sector: Gauging the Impact on Consumption," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 459-481, June.
    5. Nyakabawo, Wendy & Miller, Stephen M. & Balcilar, Mehmet & Das, Sonali & Gupta, Rangan, 2015. "Temporal causality between house prices and output in the US: A bootstrap rolling-window approach," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 55-73.
    6. Sylvain Leduc & Daniel Wilson, 2013. "Roads to Prosperity or Bridges to Nowhere? Theory and Evidence on the Impact of Public Infrastructure Investment," NBER Macroeconomics Annual, University of Chicago Press, vol. 27(1), pages 89-142.
    7. Tsangyao Chang & Su-Ling Tsai & Kai-yin Allison Haga, 2017. "Uncovering the interrelationship between the U.S. stock and housing markets: a bootstrap rolling window Granger causality approach," Applied Economics, Taylor & Francis Journals, vol. 49(58), pages 5841-5848, December.
    8. Beatrice Simo-Kengne & Stephen Miller & Rangan Gupta & Mehmet Balcilar, 2016. "Evolution of the Monetary Transmission Mechanism in the US: the Role of Asset Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 52(3), pages 226-243, April.
    9. Marco Di Maggio & Amir Kermani & Kaveh Majlesi, 2020. "Stock Market Returns and Consumption," Journal of Finance, American Finance Association, vol. 75(6), pages 3175-3219, December.
    10. Beatrice D. Simo-Kengne & Rangan Gupta & Manoel Bittencourt, 2013. "The Impact of House Prices on Consumption in South Africa: Evidence from Provincial-Level Panel VARs," Housing Studies, Taylor & Francis Journals, vol. 28(8), pages 1133-1154, November.
    11. Holger Mueller & Constantine Yannelis, 2022. "Increasing Enrollment in Income‐Driven Student Loan Repayment Plans: Evidence from the Navient Field Experiment," Journal of Finance, American Finance Association, vol. 77(1), pages 367-402, February.
    12. Bhatia, Kul & Mitchell, Chris, 2016. "Household-specific housing capital gains and consumption: Evidence from Canadian microdata," Regional Science and Urban Economics, Elsevier, vol. 56(C), pages 19-33.
    13. Ray C. Fair, 2019. "Some Important Macro Points," Cowles Foundation Discussion Papers 2165, Cowles Foundation for Research in Economics, Yale University.
    14. Aye, Goodness C. & Balcilar, Mehmet & Gupta, Rangan & Majumdar, Anandamayee, 2015. "Forecasting aggregate retail sales: The case of South Africa," International Journal of Production Economics, Elsevier, vol. 160(C), pages 66-79.
    15. Gabriel Chodorow-Reich & Plamen T. Nenov & Alp Simsek, 2021. "Stock Market Wealth and the Real Economy: A Local Labor Market Approach," American Economic Review, American Economic Association, vol. 111(5), pages 1613-1657, May.
    16. G. C. Lim & Q. Zeng, 2016. "Consumption, Income, and Wealth: Evidence from Age, Cohort, and Period Elasticities," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(3), pages 489-508, September.
    17. Anderson, D. Mark & Crost, Benjamin & Rees, Daniel I., 2020. "Do economic downturns fuel racial animus?," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 9-18.
    18. repec:ipg:wpaper:2014-476 is not listed on IDEAS
    19. Yener Coskun & Christos Bouras & Rangan Gupta & Mark E. Wohar, 2021. "Multi-Horizon Financial and Housing Wealth Effects across the U.S. States," Sustainability, MDPI, vol. 13(3), pages 1-20, January.
    20. Ray C. Fair, 2017. "Household Wealth and Macroeconomic Activity: 2008–2013," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(2-3), pages 495-523, March.

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