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House Price, Stock Price and Consumption in South Africa: A Structural VAR Approach

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Author Info

  • Goodness C. Aye

    ()
    (Department of Economics, University of Pretoria)

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

  • Alain Kaninda

    ()
    (Department of Economics, University of Pretoria)

  • Wendy Nyakabawo

    ()
    (Department of Economics, University of Pretoria)

  • Aarifah Razak

    ()
    (Department of Economics, University of Pretoria)

Abstract

This paper compares the effects of real house price and real stock price shocks on consumption decisions in South Africa over the period 1966 to 2012 using a Structural Vector Autoregressive (SVAR) approach.The sample comprises quarterly, seasonally adjusted South African data on consumption, inflation, real house price, real stock price and the nominal Treasury bill rate. We find that a positive 1 percent shock in stock prices leads to about 0.05 percent increase in consumption, with the effect being short-lived, and declines after 4 quarters to become statistically insignificant. While, a 1 percent shock in house prices increase consumption by about 0.3 percent at around the 4th quarter, but thereafter declines and becomes negative from the 8th quarter. These results show that in South Africa, house prices play economically, but not statistically, a greater role than stock prices with respect to consumption expenditure.

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Bibliographic Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201309.

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Length: 10 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:pre:wpaper:201309

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Keywords: Consumption; House Price; Stock Prices; Structural Vector Autoregression;

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References

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