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Wealth Effects on Household Final Consumption: Stock and Housing Market Channels

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  • Yener Coskun

    () (Capital Markets Board of Turkey and Middle East Technical University, Eskişehir Yolu 8.Km No:156, Ankara 06530, Turkey)

  • Burak Sencer Atasoy

    () (Turkish Treasury, Inonu Blv. No 36 Emek, Ankara 06510, Turkey)

  • Giacomo Morri

    () (SDA Bocconi School of Management, 20136 Milano, Italy)

  • Esra Alp

    () (Economics Department, Social Sciences Institute, Dokuz Eylül University, Izmir 35160, Turkey)

Abstract

The study primarily explores the linkage between wealth effects, arising from stock and housing market channels, and household final consumption for 11 advanced countries over the period from 1970 Q1 to 2015 Q4. As a modelling strategy, we employ regression analysis through the common correlated effects mean group (CCEMG) estimator, as well as Durbin–Hausman cointegration and Dumitrescu and Hurlin (2012) causality tests. The study provides various pieces of evidence through whole-panel and country-level analyses. In this respect, we find that consumption is mostly explained by income and housing wealth is positively and significantly correlated with consumption. As counter-intuitive evidence, we detect a negative linkage between consumption and stock wealth. The evidence also suggests a long-run cointegration relationship among consumption, income, interest rates, housing wealth, and stock wealth. Moreover, we find bidirectional causality between consumption and income, stock wealth, housing wealth, and interest rates. Overall, the evidence implies that housing wealth, rather than stock wealth, is the primary source of consumption growth in advanced countries.

Suggested Citation

  • Yener Coskun & Burak Sencer Atasoy & Giacomo Morri & Esra Alp, 2018. "Wealth Effects on Household Final Consumption: Stock and Housing Market Channels," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 6(2), pages 1-32, June.
  • Handle: RePEc:gam:jijfss:v:6:y:2018:i:2:p:57-:d:150855
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    More about this item

    Keywords

    consumption; housing wealth; stock wealth; asset transmission; CCEMG;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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