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Impact of House Price Changes on Durable and Non-Durable Consumption in the United States

Author

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  • Sujata Saha

    (Wabash College)

Abstract

This paper examines the symmetric and asymmetric effects of house price changes and a few other macroeconomic variables on durable and non-durable consumption separately. The study considers the nonlinear panel Autoregressive Distributed Lag (ARDL) approach (Pooled Mean Group (PMG) estimation (Pesaran, 1997; Pesaran et al., 1999)) for cointegration and error-correction modeling, and uses annual data from fifty states of the U.S. The results show that changes in house prices have asymmetric effects on both durable and non-durable consumption in the long run. To dig deeper into the relationship between house price and consumption, I divide the fifty U.S. states into three categories: high-, middle- and low-income states. This helps to examine how the responsiveness of durable and non-durable consumption varies across these three categories. The findings show that the low-income states are affected more by changes in house prices than that of the high- and middle-income states.

Suggested Citation

  • Sujata Saha, 2023. "Impact of House Price Changes on Durable and Non-Durable Consumption in the United States," International Real Estate Review, Global Social Science Institute, vol. 26(1), pages 73-93.
    • Handle: RePEc:ire:issued:v:26:n:01:2023:p:73-93
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Nonlinear ARDL; Asymmetry; House Prices; Consumption;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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