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Household saving and real house prices: an international perspective

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  • Palle S. Andersen
  • Neale Kennedy
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    Abstract

    This cross-country study provides empirical evidence on the influence of house prices on the aggregate consumption and saving behaviour of households. Housing wealth constitutes a significant portion of total wealth for households, suggesting that their expenditure patterns are likely to reflect housing market developments. The paper first describes developments in house prices in 15 industrialised countries over the period 1970-72 and then empirically tests the relationship between house prices, household debt and saving. The main findings are that while house price movements have played a significant role in the 1980s in determining households' saving behaviour, the magnitude and direction of their impact has varied considerably across countries. A negative effect is identified in Germany, Japan, the United Kingdom and the Untied States, and a positive one in the remaining countries. The reasons for the differing responses are to be found in variations in the characteristics of national housing market, in the redistribution of wealth within the household sector and in changes in financial markets.

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    Bibliographic Info

    Paper provided by Bank for International Settlements in its series BIS Working Papers with number 20.

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    Length: 74 pages
    Date of creation: Jan 1994
    Date of revision:
    Handle: RePEc:bis:biswps:20

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    Cited by:
    1. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2012. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Department of Economics, Working Paper Series qt6px1d1sc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    2. Duca, John V. & Muellbauer, John & Murphy, Anthony, 2010. "Housing markets and the financial crisis of 2007-2009: Lessons for the future," Journal of Financial Stability, Elsevier, vol. 6(4), pages 203-217, December.
    3. Maclennan, Duncan & Muellbauer, John & Stephens, Mark, 1998. "Asymmetries in Housing and Financial Market Institutions and EMU," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 54-80, Autumn.
    4. Paul Louis Ceriel Hilbers & Lisbeth Zacho & Qin Lei, 2001. "Real Estate Market Developments and Financal Sector Soundness," IMF Working Papers 01/129, International Monetary Fund.
    5. Matteo Iacoviello, 2002. "House Prices and Business Cycles in Europe: a VAR Analysis," Boston College Working Papers in Economics 540, Boston College Department of Economics.
    6. Englund, Peter & Ioannides, Yannis M., 1997. "House Price Dynamics: An International Empirical Perspective," Journal of Housing Economics, Elsevier, vol. 6(2), pages 119-136, June.
    7. Nathalie Girouard & Sveinbjörn Blöndal, 2001. "House Prices and Economic Activity," OECD Economics Department Working Papers 279, OECD Publishing.
    8. Janine Aron & John Muellbauer, 2006. "Housing Wealth, Credit Conditions and Consumption," Economics Series Working Papers WPS/2006-08, University of Oxford, Department of Economics.
    9. Lunde, Jens, 2006. "The owner-occupiers’ capital structure during a house price boom," Working Papers 2005-3, Copenhagen Business School, Department of Finance.
    10. Gerdesmeier, Dieter & Lenarčič, Andreja & Roffia, Barbara, 2012. "An alternative method for identifying booms and busts in the euro area housing market," Working Paper Series 1493, European Central Bank.
    11. Elbourne, Adam, 2008. "The UK housing market and the monetary policy transmission mechanism: An SVAR approach," Journal of Housing Economics, Elsevier, vol. 17(1), pages 65-87, March.
    12. Iacoviello, Matteo, 2000. "House prices and the macroeconomy in Europe: Results from a structural var analysis," Working Paper Series 0018, European Central Bank.
    13. Steven Morling & Robert Subbaraman, 1995. "Superannuation and Saving," RBA Research Discussion Papers rdp9511, Reserve Bank of Australia.

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