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A simulation model of consumer spending and housing demand

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  • Westaway, Peter

Abstract

This paper adopts a micro-to-macro approach to examine the determination of aggregate personal sector behaviour, notably of consumer spending and housing demand. Previous analysis of the impact of borrowing constraints on the simple finite horizon life cycle model of individual consumption is extended to include consideration of housing demand financed by mortgage loans and of bequests. The implied aggregate behaviour of consumer spending and housing demand is derived by simulating an overlapping generations model. Attention is focussed on the effects of the relaxation of borrowing constraints, on intergenerational transfers of wealth and on the implications of real growth in house prices. The consequences for the aggregate saving ratio and wealth to income ratios are described.

Suggested Citation

  • Westaway, Peter, 1992. "A simulation model of consumer spending and housing demand," National Institute of Economic and Social Research (NIESR) Discussion Papers 15, National Institute of Economic and Social Research.
    • Handle: RePEc:nsr:niesrd:15
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    File URL: https://www.niesr.ac.uk/wp-content/uploads/1992/05/DP15.pdf
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    Cited by:

    1. Hanna Augustyniak & Laszek Jacek & Krzysztof Olszewski & Joanna Waszczuk, 2013. "Modelling of cycles in the residential real estate market – interactions between the primary and the secondary market and multiplier effects," NBP Working Papers 143, Narodowy Bank Polski.
    2. Pain, Nigel & Westaway, Peter, 1997. "Modelling structural change in the UK housing market: A comparison of alternative house price models," Economic Modelling, Elsevier, vol. 14(4), pages 587-610, October.

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