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Consumption and Housing Wealth Breakdown of the Effect of a Rise in Interest Rates

Author

Listed:
  • Manuel Leon Navarro

    () (Administración y Dirección de Empresas - Colegio Universitario Cardenal Cisneros)

  • Rafael Flores de Frutos

    () (Centro Universitario de Estudios Financieros (CUNEF) - Centro Universitario de Estudios Financieros (CUNEF))

Abstract

In this article the effect on consumption is estimated of a fall in housing wealth and housing prices, resulting from an increase in interest rates. With the help of a dynamic multiequation, macroeconomic model, the consumer response function is broken down into two parts: a direct response, related to a rise in the cost of credit and another indirect one related to the deterioration of the property market. Estimating the theoretical model is done by means of a vectorial error-correction model.

Suggested Citation

  • Manuel Leon Navarro & Rafael Flores de Frutos, 2011. "Consumption and Housing Wealth Breakdown of the Effect of a Rise in Interest Rates," Post-Print hal-00687732, HAL.
  • Handle: RePEc:hal:journl:hal-00687732
    DOI: 10.1080/00036846.2011.558484
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00687732
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    References listed on IDEAS

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