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Housing Wealth and Aggregate Consumption in Sweden

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  • Chen, Jie

    () (The Institute for Housing and Urban Research, Uppsala University)

Abstract

This paper extends the VECM cointegration model and PT (permanent-transitory) variance decomposition framework proposed by Lettau & Ludvigson (2004) and applies them on the Swedish data spanning from 1980q1 to 2004q4. There are strong statistical evidences that the movements of aggregate consumption, disposable income, housing wealth and financial wealth are tied together. However, it also suggests that the short run variations in the Swedish housing market are largely dissociated with consumer spending. Meanwhile, it is shown that the strength of the linkage between consumption and housing wealth is not sensitive to different model specifications and various measures of key variables.

Suggested Citation

  • Chen, Jie, 2006. "Housing Wealth and Aggregate Consumption in Sweden," Working Paper Series 2006:16, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:2006_016
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    Cited by:

    1. 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.
    2. Olivier Allain, 2011. "The impact of income distribution on consumption: a reassessment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00712657, HAL.
    3. Bilgili, Faik, 2007. "The Permanent and Transitory Effects on Consumption and Income: Evidence from the Turkish Economy," MPRA Paper 24090, University Library of Munich, Germany, revised 20 Jul 2010.
    4. Willie Lahari, 2010. "Permanent and Transitory Shocks among Pacific Island Economies - Prospects for a Pacific Islands Currency Union," Working Papers 1001, University of Otago, Department of Economics, revised Feb 2010.
    5. Chen, Jie, 2006. "Re-evaluating the association between housing wealth and aggregate consumption: New evidence from Sweden," Journal of Housing Economics, Elsevier, vol. 15(4), pages 321-348, December.
    6. Sören Blomquist & Vidar Christiansen & Luca Micheletto, 2010. "Public Provision of Private Goods and Nondistortionary Marginal Tax Rates," American Economic Journal: Economic Policy, American Economic Association, vol. 2(2), pages 1-27, May.
    7. Faik Bilgili & Hayriye Hilal Baðlýtaþ, 2016. "Testing the Permanent Income and Random Walk Hypotheses for Turkey†," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1371-1378.
    8. Ågren, Martin, 2006. "Prospect Theory and Higher Moments," Working Paper Series 2006:24, Uppsala University, Department of Economics.
    9. Dalina Amonhaemanon, 2015. "The Impact of Stock Price and Real Estate Price Shocks on Consumption: The Thai Experience," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(1), pages 137-148, January.

    More about this item

    Keywords

    housing wealth; consumption; wealth effect; VECM; PT decomposition;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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