IDEAS home Printed from https://ideas.repec.org/p/cnb/wpaper/2017-11.html
   My bibliography  Save this paper

House Prices and Household Consumption: The Case of the Czech Republic

Author

Listed:
  • Jan Bruha
  • Michal Hlavacek
  • Lubos Komarek

Abstract

In this paper, we investigate whether movements in property prices have detectable effects on Czech households' consumption and saving decisions. We concentrate on three episodes of movements in house and apartment prices and ask whether property owners have significantly different consumption and saving choices from households living in rented properties. We found that, on average, property owners tend to have a lower propensity to consume and a higher saving rate independently of whether property prices move up or down. This casts doubts on the strength of the collateral channel linking the housing market to the macroeconomy in the Czech Republic.

Suggested Citation

  • Jan Bruha & Michal Hlavacek & Lubos Komarek, 2017. "House Prices and Household Consumption: The Case of the Czech Republic," Working Papers 2017/11, Czech National Bank, Research and Statistics Department.
  • Handle: RePEc:cnb:wpaper:2017/11
    as

    Download full text from publisher

    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/cnb_wp/cnbwp_2017_11.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hans-Eggert Reimers, 2012. "Early Warning Indicator Model of Financial Developments Using an Ordered Logit," Business and Economic Research, Macrothink Institute, vol. 2(2), pages 171-191, December.
    2. 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, vol. 5(1), pages 1-34, May.
    3. Charles Calomiris & Stanley D. Longhofer & William Miles, 2009. "The (Mythical?) Housing Wealth Effect," NBER Working Papers 15075, National Bureau of Economic Research, Inc.
    4. Lainà, Patrizio & Nyholm, Juho & Sarlin, Peter, 2015. "Leading indicators of systemic banking crises: Finland in a panel of EU countries," Review of Financial Economics, Elsevier, vol. 24(C), pages 18-35.
    5. Tomas Havranek & Mojmir Hampl, 2017. "Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech National Bank's Approach," Research and Policy Notes 2017/01, Czech National Bank, Research and Statistics Department.
    6. Babecký, Jan & Havránek, Tomáš & Matějů, Jakub & Rusnák, Marek & Šmídková, Kateřina & Vašíček, Bořek, 2013. "Leading indicators of crisis incidence: Evidence from developed countries," Journal of International Money and Finance, Elsevier, vol. 35(C), pages 1-19.
    7. Mojmir Hampl & Tomas Havranek, 2017. "Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech Approach," Working Papers IES 2017/12, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2017.
    8. Keisuke Hirano & Guido W. Imbens & Geert Ridder, 2003. "Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score," Econometrica, Econometric Society, vol. 71(4), pages 1161-1189, July.
    9. Matteo Iacoviello & Stefano Neri, 2010. "Housing Market Spillovers: Evidence from an Estimated DSGE Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 125-164, April.
    10. Alexandre Belloni & Victor Chernozhukov & Christian Hansen, 2014. "High-Dimensional Methods and Inference on Structural and Treatment Effects," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 29-50, Spring.
    11. Lainà, Patrizio & Nyholm, Juho & Sarlin, Peter, 2015. "Leading indicators of systemic banking crises: Finland in a panel of EU countries," Review of Financial Economics, Elsevier, vol. 24(C), pages 18-35.
    12. Ghent, Andra C. & Owyang, Michael T., 2010. "Is housing the business cycle? Evidence from US cities," Journal of Urban Economics, Elsevier, vol. 67(3), pages 336-351, May.
    13. Orazio P. Attanasio & Laura Blow & Robert Hamilton & Andrew Leicester, 2009. "Booms and Busts: Consumption, House Prices and Expectations," Economica, London School of Economics and Political Science, vol. 76(301), pages 20-50, February.
    14. Eurostat, 2013. "Handbook on Residential Property Prices Indices," World Bank Publications - Books, The World Bank Group, number 17280, April.
    15. repec:zbw:bofrdp:2014_014 is not listed on IDEAS
    16. Matteo Iacoviello & Stefano Neri, 2010. "Housing Market Spillovers: Evidence from an Estimated DSGE Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 125-164, April.
    17. Daniel Cooper, 2013. "House Price Fluctuations: The Role of Housing Wealth as Borrowing Collateral," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1183-1197, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simona Malovaná & Michal Hlaváček & Kamil Galuščák, 2018. "Citlivost českých domácností na úrokový a příjmový šok. Aplikace na mikroúdajích [Sensitivity of Czech Households to Interest Rate and Income Shock. Applications on Microdata]," Politická ekonomie, Prague University of Economics and Business, vol. 2018(5), pages 531-549.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lu Zhang, 2019. "Do house prices matter for household consumption?," CPB Discussion Paper 396.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Jan Bruha & Michal Hlavacek & Lubos Komarek, 2013. "Impacts of housing prices on the financial position of households," Occasional Publications - Chapters in Edited Volumes, in: CNB Financial Stability Report 2012/2013, chapter 0, pages 120-127, Czech National Bank, Research and Statistics Department.
    3. Lu Zhang, 2019. "Do house prices matter for household consumption?," CPB Discussion Paper 396, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Mehmet Balcilar & Rangan Gupta & Stephen M. Miller, 2015. "The out-of-sample forecasting performance of nonlinear models of regional housing prices in the US," Applied Economics, Taylor & Francis Journals, vol. 47(22), pages 2259-2277, May.
    5. De Veirman Emmanuel & Dunstan Ashley, 2011. "Time-Varying Returns, Intertemporal Substitution and Cyclical Variation in Consumption," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-41, July.
    6. Musso, Alberto & Neri, Stefano & Stracca, Livio, 2011. "Housing, consumption and monetary policy: How different are the US and the euro area?," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 3019-3041, November.
    7. Balcilar, Mehmet & Gupta, Rangan & Shah, Zahra B., 2011. "An in-sample and out-of-sample empirical investigation of the nonlinearity in house prices of South Africa," Economic Modelling, Elsevier, vol. 28(3), pages 891-899, May.
    8. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    9. Rangan Gupta & Marius Jurgilas & Alain Kabundi & Stephen M. Miller, 2009. "Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Model," Working Papers 200913, University of Pretoria, Department of Economics.
    10. Chadi S. Abdallah & William D. Lastrapes, 2013. "Evidence on the Relationship between Housing and Consumption in the United States: A State-Level Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(4), pages 559-590, June.
    11. Chen, Xin & Qin, Yaohua & Xiao, He & Zhang, Yifei, 2019. "Microfinancing and Home-purchase Restrictions: Evidence from the Online “Peer-to-Peer” Lending in China," MPRA Paper 95375, University Library of Munich, Germany.
    12. Ian Christensen & Paul Corrigan & Caterina Mendicino & Shin‐Ichi Nishiyama, 2016. "Consumption, housing collateral and the Canadian business cycle," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(1), pages 207-236, February.
    13. Davis, Morris A. & Van Nieuwerburgh, Stijn, 2015. "Housing, Finance, and the Macroeconomy," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 753-811, Elsevier.
    14. Rangan Gupta & Stephen M. Miller & Dylan van Wyk, 2010. "Financial Market Liberalization, Monetary Policy, and Housing Price Dynamics," Working papers 2010-06, University of Connecticut, Department of Economics.
    15. Njindan Iyke, Bernard, 2015. "Assessing the Effects of Housing Market Shocks on Output: The Case of South Africa," MPRA Paper 69610, University Library of Munich, Germany, revised 01 Feb 2016.
    16. Christophe Andre & Rangan Gupta & Patrick T. Kanda, 2012. "Do House Prices Impact Consumption and Interest Rate? Evidence from OECD Countries using an Agnostic Identification Procedure," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 58(1), pages 19-70.
    17. Beatrice D. Simo-Kengne & Rangan Gupta & Manoel Bittencourt, 2013. "The Impact of House Prices on Consumption in South Africa: Evidence from Provincial-Level Panel VARs," Housing Studies, Taylor & Francis Journals, vol. 28(8), pages 1133-1154, November.
    18. Christopher D. Carroll & Misuzu Otsuka & Jiri Slacalek, 2011. "How Large Are Housing and Financial Wealth Effects? A New Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(1), pages 55-79, February.
    19. Chen, Nan-Kuang & Cheng, Han-Liang & Mao, Ching-Sheng, 2012. "House price, mortgage premium, and business fluctuations," Economic Modelling, Elsevier, vol. 29(4), pages 1388-1398.
    20. Francisco Camões & Sofia Vale, 2020. "I feel wealthy: A major determinant of Portuguese households’ indebtedness?," Empirical Economics, Springer, vol. 58(4), pages 1953-1978, April.

    More about this item

    Keywords

    Consumption and saving decisions; property prices;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cnb:wpaper:2017/11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tomas Karhanek (email available below). General contact details of provider: https://edirc.repec.org/data/cnbgvcz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.