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Real Estate Versus Financial Wealth in Consumption

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  • John D. Benjamin
  • Peter Chinloy
  • G. Donald Jud

Abstract

The consumption function for the U.S. economy is estimated with real estate and financial wealth for quarterly data for 1952:1--2001:4. An additional dollar of real estate wealth increases consumption by 8 cents in the current year, as compared with only 2 cents for financial wealth. The results are consistent with theoretical bounds on the marginal propensity to consume from aggregate wealth. The decline in the stock market during 2000--2001 had a limited impact on aggregate demand in part because of an offsetting real estate wealth effect.

Suggested Citation

  • John D. Benjamin & Peter Chinloy & G. Donald Jud, 2004. "Real Estate Versus Financial Wealth in Consumption," The Journal of Real Estate Finance and Economics, Springer, vol. 29(3), pages 341-354, November.
  • Handle: RePEc:kap:jrefec:v:29:y:2004:i:3:p:341-354
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