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Consumption, personal income, financial wealth, housing wealth, and long-term interest rates: a panel cointegration approach for 50 US states

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  • Kontana Dimitra
  • Fountas Stilianos

    (Department of Economics, University of Macedonia, Thessaloniki, Greece)

Abstract

This study investigates the long-run and short-run relationship between consumption, income, financial and housing wealth, and a long-term interest rate for the 50 US states. Using an updated set of quarterly data from 1975 to 2018, we perform panel cointegration analysis allowing for cross-sectional dependence. We obtain the following results. First, there is strong evidence for cointegration among consumption and its determinants. Second, estimates of the housing wealth and financial wealth elasticity of consumption range from 0.072 to 0.115 and 0.044 to 0.080, respectively. Finally, Granger causality tests show that there is a bidirectional short-term causality between per capita consumption, income, and financial wealth in the short run and between all the variables in the long run.

Suggested Citation

  • Kontana Dimitra & Fountas Stilianos, 2022. "Consumption, personal income, financial wealth, housing wealth, and long-term interest rates: a panel cointegration approach for 50 US states," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 26(3), pages 417-435, June.
    • Handle: RePEc:bpj:sndecm:v:26:y:2022:i:3:p:417-435:n:1
    DOI: 10.1515/snde-2020-0057
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    More about this item

    Keywords

    10-year treasury constant maturity rate; consumption; financial wealth; Granger causality; housing wealth; panel cointegration; wealth effects; E21; E44; R31;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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