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The Influence of Housing Price Developments on Household Consumption: Empirical Analysis for the Czech Republic

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Abstract

This paper studies how the change of wealth of households represented by housing prices and stock market prices influences households’ consumption. We provide empirical analysis based on the Czech aggregate data from 1998–2009. We analyse the effect of change in households’ wealth on the consumption of both durable and non-durable goods employing the VAR and VEC models on quarterly data. The robustness of results is verified by Dynamic OLS and Fully Modified OLS framework. We find a positive effect of both housing wealth and stock market wealth on both types of consumption. In case of non-durable goods consumption, we estimate the cointegrating vector and conclude that the elasticity of non-durable goods consumption with respect to housing wealth is over three times greater than with respect to stock market wealth.

Suggested Citation

  • Sylvie Dvoráková & Jakub Seidler, 2012. "The Influence of Housing Price Developments on Household Consumption: Empirical Analysis for the Czech Republic," Working Papers IES 2012/22, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2012.
  • Handle: RePEc:fau:wpaper:wp2012_22
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    File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/4654
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    Cited by:

    1. Oxana Babecka Kucharcukova & Michal Franta & Dana Hajkova & Petr Kral & Ivana Kubicova & Anca Podpiera & Branislav Saxa, 2013. "What We Know About Monetary Policy Transmission in the Czech Republic: Collection of Empirical Results," Research and Policy Notes 2013/01, Czech National Bank, Research Department.

    More about this item

    Keywords

    households; housing prices; consumption; housing wealth; stock market wealth; VAR model; VECM;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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