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Housing Equity Withdrawal and Consumption Dynamics in Estonia 2002-2011

Author

Listed:
  • Madis Aben

    (Ministry of Finance, Estonia)

  • Merike Kukk

    (Tallinn University of Technology)

  • Karsten Staehr

    (Tallinn University of Technology, Eesti Pank)

Abstract

The linkages between housing wealth and household consumption are contentious. This paper uses a recently introduced statistical concept, housing equity withdrawal (HEW), to investigate the linkages in the case of Estonia. HEW is defined as net borrowing by the household sector, which is secured on housing equity but not invested in housing assets. HEW is thus a direct measure of the cash flow from housing assets available to the household sector. The HEW series computed for Estonia are much more volatile than similar series in countries such as the UK and the USA. The volatility is related to rapidly changing financing conditions and real estate prices, but also to consumption aspirations. Econometric analysis confirms a close correlation between housing equity withdrawal and consumption, but the relation appears to differ between the boom in 2002-2007 and the downturn period 2008-2011.

Suggested Citation

  • Madis Aben & Merike Kukk & Karsten Staehr, 2012. "Housing Equity Withdrawal and Consumption Dynamics in Estonia 2002-2011," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 4(1).
  • Handle: RePEc:ttu:rebcee:3
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    References listed on IDEAS

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    Cited by:

    1. Kukk, Merike, 2016. "How did household indebtedness hamper consumption during the recession? Evidence from micro data," Journal of Comparative Economics, Elsevier, pages 764-786.
    2. Merike Kukk, 2014. "How Did Household Indebtedness Hamper Consumption during the Recession? Evidence from Micro Data," TUT Economic Research Series 14, Department of Finance and Economics, Tallinn University of Technology.
    3. Juan Carlos Cuestas & Merike Kukk, 2017. "Asymmetries in the interaction between housing prices and housing credit in Estonia," Bank of Estonia Working Papers wp2017-2, Bank of Estonia, revised 25 May 2017.
    4. Merike Kukk, 2015. "How Did Household Indebtedness Hamper Consumption during the Recession? Evidence from Micro Data," a/ Working Papers Series 1505, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
    5. Anita Èeh Èasni, 2014. "Housing Wealth Effect on Personal Consumption: Empirical Evidence from European Post-Transition Economies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(5), pages 392-406, November.

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