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Housing wealth and consumption

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  • Matteo Iacoviello

Abstract

Housing wealth is about one half of household net worth, and consumption is a considerable fraction (about two thirds) of Gross Domestic Product in the United States. Empirically, movements in housing wealth are associated with movements in consumption in the same direction. This observation has led many economists, commentators and policy makers to study how housing wealth and consumption are linked together. A sizeable portion of the comovement between housing wealth and consumption reflects common factors driving both variables, rather than the "wealth effect" of the former on the latter; however, a growing body of evidence suggests that the comovement is larger in developed financial markets and in the presence of liquidity constraints.

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File URL: http://www.federalreserve.gov/pubs/ifdp/2011/1027/ifdp1027.pdf
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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 1027.

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Date of creation: 2011
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Handle: RePEc:fip:fedgif:1027

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Related research

Keywords: Consumption (Economics) - United States ; Home ownership - United States ; Wealth - United States;

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Cited by:
  1. Guglielmo Maria Caporale & Mauro Costantini & Antonio Paradiso, 2012. "Re-examining the Decline in the US Saving Rate: The Impact of Mortgage Equity Withdrawal," Discussion Papers of DIW Berlin 1232, DIW Berlin, German Institute for Economic Research.
  2. Hippolyte D'Albis & Eleni Iliopulos, 2013. "Collateral constraints and rental markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00964867, HAL.
  3. Cynthia A. Bansa & Martha A. Starr, 2011. "Distributional costs of the housing-price bust," Working Papers 2011-04, American University, Department of Economics.

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