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Real Estate Market and Consumption: Macro and Micro Evidence of Japan

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  • Kazuo Ogawa

    (Kansaigaidai University)

Abstract

This study is an empirical investigation into the relationship between the real estate market and consumption in Japan. The purpose of this study is twofold. First, we investigate the channel through which the performance of the real estate market affects consumption. Using the quarterly time series data, we estimate the VAR model to pin down the transmission mechanism of land price to consumption. We find that collateral channel played an important role in propagating a shock in land price to consumption in the bubble period and the lost decades. Second, we estimate the effect of housing wealth on consumption, using the panel data of the Japan Household Panel Survey from 2009 to 2017. We find that collateral channel is still at work for young households. Our estimates of marginal propensity to consume out of housing wealth is 0.0097 to 0.0146, comparable with the estimates in the previous studies.

Suggested Citation

  • Kazuo Ogawa, 2020. "Real Estate Market and Consumption: Macro and Micro Evidence of Japan," GRU Working Paper Series GRU_2020_001, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    • Handle: RePEc:cth:wpaper:gru_2020_001
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    Keywords

    land price; consumption; VAR model; wealth effect channel; collateral channel;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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