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Housing wealth, financial wealth, and consumption: New evidence for Italy and the UK

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  • Barrell, Ray
  • Costantini, Mauro
  • Meco, Iris

Abstract

This paper aims to investigate the long-run impact of housing and financial wealth on consumption in Italy and the UK using two different estimation methods. The novelty of the paper is to consider the recent financial crisis when studying wealth effects. The dynamics of wealth effects are also evaluated by a rolling regression analysis. The results show that: i) housing wealth plays no role in Italy, whereas it is significant in the UK; ii) in both countries, the financial wealth exerts a positive and significant impact on aggregate consumption; and iii) by and large, the housing wealth effect assumes relatively increasing importance over time in the UK, while for Italy this is true for the financial wealth effect.

Suggested Citation

  • Barrell, Ray & Costantini, Mauro & Meco, Iris, 2015. "Housing wealth, financial wealth, and consumption: New evidence for Italy and the UK," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 316-323.
    • Handle: RePEc:eee:finana:v:42:y:2015:i:c:p:316-323
    DOI: 10.1016/j.irfa.2015.08.007
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    3. Kolisi, Nwabisa & Phiri, Andrew, 2017. "Changes in the relationship between interest rates and housing prices in South Africa around the 2007 financial crisis," MPRA Paper 80173, University Library of Munich, Germany.
    4. García Ana Laura & González Juan Pedro & Velázquez Jhasua, 2022. "An Approach for Housing Wealth Estimation: The Mexican Case," Working Papers 2022-12, Banco de México.
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    6. Janusz Jabłonowski, 2021. "MPC out of Augmented Wealth in Poland," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 13(3), pages 253-286, September.
    7. Konstantina Manou & Panagiotis Palaios & Evangelia Papapetrou, 2019. "Housing wealth, household debt and financial assets: are there implications for consumption?," Working Papers 263, Bank of Greece.
    8. Li, Cheng & Zhang, Ying, 2021. "How does housing wealth affect household consumption? Evidence from macro-data with special implications for China," China Economic Review, Elsevier, vol. 69(C).
    9. Hassani, Hossein & Yeganegi, Mohammad Reza & Gupta, Rangan, 2019. "Does inequality really matter in forecasting real housing returns of the United Kingdom?," International Economics, Elsevier, vol. 159(C), pages 18-25.
    10. McInerney, Niall, 2019. "Macroprudential Policy, Banking and the Real Estate Sector," MPRA Paper 91777, University Library of Munich, Germany.
    11. Zhang, Dongyang & Guo, Rui, 2020. "The consumption response to household leverage in China: The role of investment at household level," International Review of Financial Analysis, Elsevier, vol. 71(C).
    12. Yener Coskun & Burak Sencer Atasoy & Giacomo Morri & Esra Alp, 2018. "Wealth Effects on Household Final Consumption: Stock and Housing Market Channels," IJFS, MDPI, vol. 6(2), pages 1-32, June.
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    More about this item

    Keywords

    Financial wealth; Housing wealth; Consumption; Financial crisis;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G01 - Financial Economics - - General - - - Financial Crises

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