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The Housing Rental Rate Elasticity of Aggregate Consumption: A Panel Study for OECD Countries


  • Dieter Gstach


This paper investigates the impact of changing housing rental rates upon aggregate consumption based on yearly data for 18 OECD countries observed between 1970 and 2004. Estimates of long run elasticities are derived from cointegrating relationships with panel estimation techniques and compared with estimates implicitly given in short run dynamic equations. The results across all estimation approaches yield similar magnitudes and indicate a significantly negative impact of rental rate increases upon aggregate consumption. For the EU-25 or the USA, for example, relevant elasticities lie in the range between -0.13 and -0.17. The jointly estimated elasticities of the wealth components seem unaffected, relative to previous studies, by the inclusion of the rental housing market variables.

Suggested Citation

  • Dieter Gstach, 2007. "The Housing Rental Rate Elasticity of Aggregate Consumption: A Panel Study for OECD Countries," International Journal of Housing Policy, Taylor & Francis Journals, vol. 7(4), pages 367-382.
  • Handle: RePEc:taf:intjhp:v:7:y:2007:i:4:p:367-382 DOI: 10.1080/14616710701650419

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    References listed on IDEAS

    1. Karl E. Case & Robert J. Shiller, 1988. "The behavior of home buyers in boom and post-boom markets," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 29-46.
    2. Trevor Fitzpatrick & Kieran Mcquinn, 2007. "House Prices And Mortgage Credit: Empirical Evidence For Ireland," Manchester School, University of Manchester, vol. 75(1), pages 82-103, January.
    3. Irene de Greef & Ralph de Haas, 2002. "Housing Prices, Bank Lending, and Monetary Policy," Macroeconomics 0209010, EconWPA.
    4. Martins, Nuno C. & Villanueva, Ernesto, 2006. "The impact of mortgage interest-rate subsidies on household borrowing," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1601-1623, September.
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