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VAR Estimates of the Housing and Stock Wealth Effects: Cross-country Evidence

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  • Sheng Guo

    ()
    (Department of Economics, Florida International University)

  • Umut Unal

    ()
    (Department of Economics, Florida International University)

Abstract

We estimate the wealth effects of housing and stock market wealth using time-series data for eight developed countries. In estimation we employ the structural vector-autoregressive regressions (SVAR), which articulate the dynamic interactions of shocks to housing prices, stock values, and disposable incomes. Our results show that for these countries the initial consumption response to housing price shocks is greater than to stock market capitalization shocks, but the long-run consumption response to the latter is more persistent than to the former.

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File URL: http://casgroup.fiu.edu/pages/docs/3501/1304994927_11-03.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Florida International University, Department of Economics in its series Working Papers with number 1103.

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Length: 27 pages
Date of creation: May 2011
Date of revision:
Handle: RePEc:fiu:wpaper:1103

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Keywords: Wealth Effect; Consumption; Housing; Stock Market;

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  1. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
  2. Jiri Slacalek, 2006. "What Drives Personal Consumption?: The Role of Housing and Financial Wealth," Discussion Papers of DIW Berlin 647, DIW Berlin, German Institute for Economic Research.
  3. Andra C. Ghent & Michael T. Owyang, 2009. "Is housing the business cycle? evidence from U.S. cities," Working Papers 2009-007, Federal Reserve Bank of St. Louis.
  4. Helmut Lütkepohl & Pentti Saikkonen & Carsten Trenkler, 2001. "Maximum eigenvalue versus trace tests for the cointegrating rank of a VAR process," Econometrics Journal, Royal Economic Society, vol. 4(2), pages 8.
  5. Jörn Tenhofen & Guntram B. Wolff & Kirsten H. Heppke-Falk, 2010. "The Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Germany: A Disaggregated SVAR Analysis," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 230(3), pages 328-355, June.
  6. Nikola Dvornak & Marion Kohler, 2003. "Housing Wealth, Stock Market Wealth and Consumption: A Panel Analysis for Australia," RBA Research Discussion Papers rdp2003-07, Reserve Bank of Australia.
  7. Torsten Sløk & Hali J. Edison, 2001. "Wealth Effects and the New Economy," IMF Working Papers 01/77, International Monetary Fund.
  8. Kosuke Aoki & James Proudman & Gertjan Vlieghe, 2002. "Houses as collateral: has the link between house prices and consumption in the U.K. changed?," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 163-177.
  9. Ludwig, Alexander & Sløk, Torsten, 2004. "The relationship between stock prices, house prices and consumption in OECD," Sonderforschungsbereich 504 Publications 04-12, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  10. Christopher D. Carroll & Misuzu Otsuka & Jiri Slacalek, 2011. "How Large Are Housing and Financial Wealth Effects? A New Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(1), pages 55-79, 02.
  11. Bostic, Raphael & Gabriel, Stuart & Painter, Gary, 2009. "Housing wealth, financial wealth, and consumption: New evidence from micro data," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 79-89, January.
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