Housing wealth effect in emerging economies
AbstractIn this paper I estimate the impact of changes in real and financial wealth on private consumption for a panel of 17 emerging economies from Asia and Central and Eastern Europe. Households' consumption, income and the two measures of real and financial wealth – proxied by house and stock market prices – are found to be difference-stationary and co-integrated; by means of recent econometric techniques for heterogeneous panels, i.e. the pooled mean group estimator, inference is drawn about the long- and short-run relationships between the variables of interest. The main result of the analysis shows that both real and financial wealth positively affect households' consumption in the long-run, with the elasticity of housing wealth being larger than that of stock market wealth. Moreover, there is also a significant short-run adjustment from income, stock prices and house prices on consumption, i.e. consumption adjusts to its long-run relationship with lags. When the model is run for the two groups of countries separately, the long-run impact of an increase (decrease) in house prices is generally higher in Central and Eastern European economies with respect to Asian ones, which make them more vulnerable to further adverse housing market developments.
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Bibliographic InfoArticle provided by Elsevier in its journal Emerging Markets Review.
Volume (Year): 12 (2011)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/inca/620356
House prices; Wealth effects; Emerging markets; Panel co-integration; Pooled mean group estimator;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
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- Xi Chen & Michael Funke, 2013.
"Real-Time Warning Signs of Emerging and Collapsing Chinese House Price Bubbles,"
National Institute Economic Review,
National Institute of Economic and Social Research, vol. 223(1), pages R39-R48, February.
- Funke, Michael & Chen, Xi, 2012. "Real-time warning signs of emerging and collapsing Chinese house price bubbles," BOFIT Discussion Papers 27/2012, Bank of Finland, Institute for Economies in Transition.
- Alessio Ciarlone, 2012. "House price cycles in emerging economies," Temi di discussione (Economic working papers) 863, Bank of Italy, Economic Research and International Relations Area.
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