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Household saving and real house prices: an international perspective

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  • Palle S. Andersen
  • Neale Kennedy

Abstract

This cross-country study provides empirical evidence on the influence of house prices on the aggregate consumption and saving behaviour of households. Housing wealth constitutes a significant portion of total wealth for households, suggesting that their expenditure patterns are likely to reflect housing market developments. The paper first describes developments in house prices in 15 industrialised countries over the period 1970-72 and then empirically tests the relationship between house prices, household debt and saving. The main findings are that while house price movements have played a significant role in the 1980s in determining households' saving behaviour, the magnitude and direction of their impact has varied considerably across countries. A negative effect is identified in Germany, Japan, the United Kingdom and the Untied States, and a positive one in the remaining countries. The reasons for the differing responses are to be found in variations in the characteristics of national housing market, in the redistribution of wealth within the household sector and in changes in financial markets.

Suggested Citation

  • Palle S. Andersen & Neale Kennedy, 1994. "Household saving and real house prices: an international perspective," BIS Working Papers 20, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:20
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    References listed on IDEAS

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    1. Sanford Grossman, 1989. "The Informational Role of Prices," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262572141, January.
    2. Dasgupta, Amil, 2002. "Coordination, learning, and delay," LSE Research Online Documents on Economics 24955, London School of Economics and Political Science, LSE Library.
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    Cited by:

    1. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, pages 1-34.
    2. Steven Morling & Robert Subbaraman, 1995. "Superannuation and Saving," RBA Research Discussion Papers rdp9511, Reserve Bank of Australia.
    3. Dieter Gerdesmeier & Andreja Lenarčič & Barbara Roffia, 2015. "An alternative method for identifying booms and busts in the Euro area housing market," Applied Economics, Taylor & Francis Journals, vol. 47(5), pages 499-518, January.
    4. Englund, Peter & Ioannides, Yannis M., 1997. "House Price Dynamics: An International Empirical Perspective," Journal of Housing Economics, Elsevier, vol. 6(2), pages 119-136, June.
    5. Iacoviello, Matteo, 2000. "House prices and the macroeconomy in Europe: Results from a structural var analysis," Working Paper Series 0018, European Central Bank.
    6. Duca, John V. & Muellbauer, John & Murphy, Anthony, 2010. "Housing markets and the financial crisis of 2007-2009: Lessons for the future," Journal of Financial Stability, Elsevier, pages 203-217.
    7. Elbourne, Adam, 2008. "The UK housing market and the monetary policy transmission mechanism: An SVAR approach," Journal of Housing Economics, Elsevier, vol. 17(1), pages 65-87, March.
    8. Nathalie Girouard & Sveinbjörn Blöndal, 2001. "House Prices and Economic Activity," OECD Economics Department Working Papers 279, OECD Publishing.
    9. Maclennan, Duncan & Muellbauer, John & Stephens, Mark, 1998. "Asymmetries in Housing and Financial Market Institutions and EMU," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 54-80, Autumn.
    10. Aron, Janine & Muellbauer, John & Murphy, Anthony, 2006. "Housing wealth, credit conditions and consumption," MPRA Paper 24485, University Library of Munich, Germany.
    11. Paul Louis Ceriel Hilbers & Lisbeth S Zacho & Qin Lei, 2001. "Real Estate Market Developments and Financal Sector Soundness," IMF Working Papers 01/129, International Monetary Fund.
    12. Lunde, Jens, 2006. "The owner-occupiers’ capital structure during a house price boom," Working Papers 2005-3, Copenhagen Business School, Department of Finance.
    13. Titelman Kardonsky, Daniel & Pérez Caldentey, Esteban & Pineda Salazar, Ramón, 2009. "The bigness of smallness: the financial crisis, its contagion mechanisms and its effects in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    14. Barot, Bharat & Takala, Kari, 1998. "House prices and inflation : a cointegration analysis for Finland and Sweden," Research Discussion Papers 12/1998, Bank of Finland.
    15. Matteo Iacoviello, 2002. "House Prices and Business Cycles in Europe: a VAR Analysis," Boston College Working Papers in Economics 540, Boston College Department of Economics.

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