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Dynamics of Wealth and Consumption: New and Improved Measures for U.S. States

Listed author(s):
  • Zhou Xia

    ()

    (Fannie Mae)

  • Carroll Christopher D.

    ()

    (Johns Hopkins University)

Case, Quigley, and Shiller (2005) persuasively argue that the well-known conceptual difficulties in measuring aggregate “wealth effects” might be lessened by the use of state-level data. Unfortunately, the data required for a convincing implementation of their idea have been either virtually nonexistent (for financial wealth) or of questionable quality (for consumption). Our main contributions are to provide the first directly observed panel data on financial wealth at the state level, and to construct improved measures of state-level spending growth. Using these data, we estimate rudimentary “wealth effects” regressions that find a strong relationship between twice-lagged housing wealth growth and current spending growth, but we find no relationship between lagged financial wealth growth and current spending growth.

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File URL: https://www.degruyter.com/view/j/bejm.2012.12.issue-2/1935-1690.2403/1935-1690.2403.xml?format=INT
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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 12 (2012)
Issue (Month): 2 (March)
Pages: 1-44

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Handle: RePEc:bpj:bejmac:v:12:y:2012:i:2:n:4
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  1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
  2. Carroll, Christopher D. & Otsuka, Misuzu & Slacalek, Jiri, 2010. "How large are housing and financial wealth effects? A new approach," Working Paper Series 1283, European Central Bank.
  3. Aron, Janine & Duca, John V. & Muellbauer, John N. & Murata, Keiko & Murphy, Anthony, 2010. "Credit, housing collateral and consumption: evidence from the UK, Japan and the US," Working Papers 1002, Federal Reserve Bank of Dallas.
  4. Levin, Laurence, 1998. "Are assets fungible?: Testing the behavioral theory of life-cycle savings," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 59-83, July.
  5. Miguel Angel García & Ivan Muñiz, 2005. "The spatial effect of intra-metropolitan agglomeration economies," Working Papers wpdea0513, Department of Applied Economics at Universitat Autonoma of Barcelona.
  6. Arthur B. Kennickell, 2003. "A Rolling Tide: Changes in the Distribution of Wealth in the US, 1989-2001," Economics Working Paper Archive wp_393, Levy Economics Institute.
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