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Housing Wealth and Aggregate Consumption in Sweden

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  • Chen, Jie

    ()
    (The Institute for Housing and Urban Research, Uppsala University)

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Abstract

This paper extends the VECM cointegration model and PT (permanent-transitory) variance decomposition framework proposed by Lettau & Ludvigson (2004) and applies them on the Swedish data spanning from 1980q1 to 2004q4. There are strong statistical evidences that the movements of aggregate consumption, disposable income, housing wealth and financial wealth are tied together. However, it also suggests that the short run variations in the Swedish housing market are largely dissociated with consumer spending. Meanwhile, it is shown that the strength of the linkage between consumption and housing wealth is not sensitive to different model specifications and various measures of key variables.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2006:16.

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Length: 52 pages
Date of creation: 10 Jun 2006
Date of revision:
Handle: RePEc:hhs:uunewp:2006_016

Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Email:
Web page: http://www.nek.uu.se/
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Related research

Keywords: housing wealth; consumption; wealth effect; VECM; PT decomposition;

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Cited by:
  1. Willie Lahari, 2010. "Permanent and Transitory Shocks among Pacific Island Economies - Prospects for a Pacific Islands Currency Union," Working Papers 1001, University of Otago, Department of Economics, revised Feb 2010.
  2. Bilgili, Faik, 2007. "The Permanent and Transitory Effects on Consumption and Income: Evidence from the Turkish Economy," MPRA Paper 24090, University Library of Munich, Germany, revised 20 Jul 2010.
  3. Emmanuel De Veirman & Ashley Dunstan, 2011. "Time-Varying Returns, Intertemporal Substitution and Cyclical Variation in Consumption," CAMA Working Papers 2011-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Ågren, Martin, 2006. "Prospect Theory and Higher Moments," Working Paper Series 2006:24, Uppsala University, Department of Economics.
  5. Blomquist, Sören & Christiansen, Vidar, 2007. "Public Provision of Private Goods and Nondistortionary Marginal Tax Rates," Working Paper Series 2007:7, Uppsala University, Department of Economics.
  6. Olivier Allain, 2011. "The impact of income distribution on consumption: a reassessment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00712657, HAL.
  7. Chen, Jie, 2006. "Re-evaluating the association between housing wealth and aggregate consumption: New evidence from Sweden," Journal of Housing Economics, Elsevier, vol. 15(4), pages 321-348, December.

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