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The relationship between stock prices, house prices and consumption in OECD countries

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  • Alexander Ludwig

    ()

  • Torsten Sløk

    (Munich Center for the Economics of Aging (MEA))

Abstract

This paper analyzes the relationship between stock prices, house prices and consumption using data for 16 OECD countries. The panel data analysis suggests that the long-run responsiveness of consumption to permanent changes in stock prices is higher for countries with a market-based financial system than for countries with a bank-based financial system. Splitting the sample into the 1980s and 1990s further shows an increased sensitivity in the 1990's of consumption to permanent changes in stock prices for both countries with bank-based financial systems as well as countries with market-based financial systems. The relationship between changes in consumption and changes in house prices is positive for the second sample period across all specifications and financial systems.

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Bibliographic Info

Paper provided by Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy in its series MEA discussion paper series with number 04044.

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Date of creation: 24 Mar 2004
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Handle: RePEc:mea:meawpa:04044

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