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Can The Consumption Wealth Ratio Predict Housing Returns Evidence From Oecd Countries
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Book Synopsis Can the Consumption-Wealth Ratio Predict Housing Returns? Evidence from OECD Countries by : Guglielmo Maria Caporale
Download or read book Can the Consumption-Wealth Ratio Predict Housing Returns? Evidence from OECD Countries written by Guglielmo Maria Caporale and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a representative consumer model to analyse the relation between the transitory deviations of consumption from its common trend with aggregate wealth and labour income, cay, and the housing risk premium. The evidence based on data for 15 OECD countries shows that, if financial and housing assets are seen as complements, investors will temporarily allow consumption to rise when they expect a rise in future housing returns. By contrast, if housing assets are treated as substitutes for financial assets, consumption will be reduced.
Book Synopsis Consumption-Wealth Ratio and Housing Prices by : Simon Dubecq
Download or read book Consumption-Wealth Ratio and Housing Prices written by Simon Dubecq and published by . This book was released on 2015 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows, from the consumer budget constraint, that the consumption spending and the different components of total wealth, i.e. financial, housing and human wealths, are cointegrated and that deviations from the common trend cahy is a proxy for the consumption-wealth ratio that should predict expected returns on financial assets and housing. Using U.S post-war data, we provide empirical evidence in favor of the existence of a cointegration relationship with a structural break in the mid-eighties. Moreover, we show that until the beginning of 2000, consumption spending and housing wealth were dominated by permanent shocks. The main variable that adjusts to restore the long-run trend when a deviation occurs is the financial wealth and therefore it presents the main transitory variations in total wealth. However, over the last period 2000-2009, most of transitory shocks in total wealth are associated to fluctuations in the housing component of wealth rather than financial wealth. Besides, we found that a small fraction of transitory changes in wealth is associated with movements in consumption. These conclusions are in line with our empirical results on the ability of the cahy to predict expected asset and housing returns. Indeed, until the beginning of 2000, the proxy of the consumption-wealth ratio predicts expected asset returns and fails to explain future fluctuations in housing returns.
Book Synopsis Consumption-Wealth Ratio and Expected Housing Return by : N. Kundan Kishor
Download or read book Consumption-Wealth Ratio and Expected Housing Return written by N. Kundan Kishor and published by . This book was released on 2014 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we estimate expected return on housing by exploiting information from the variations in the consumption-wealth ratio. We combine a present-value model of consumption with an unobserved component model to express the excess consumption-assets ratio (consumption in excess of labor income) as a linear function of unobserved return on housing assets, financial assets, and consumption growth. We apply a Kalman filter to extract expected housing asset returns from the history of realized returns and excess consumption growth. Our results suggest that filtered housing returns do a significantly better job in predicting realized housing returns than other popular predictors.
Book Synopsis The Impact of Changes in Stock Prices and House Prices on Consumption in OECD Countries by : Alexander Ludwig
Download or read book The Impact of Changes in Stock Prices and House Prices on Consumption in OECD Countries written by Alexander Ludwig and published by International Monetary Fund. This book was released on 2002 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper quantifies the different impact of stock and house prices on consumption using data for 16 OECD countries. The analysis finds that the long-run impact of an increase in stock prices and house prices is in general higher in countries with a market-based financial system. The sensitivity of consumption to changes in stock wealth is about twice as large as the sensitivity to changes in housing wealth. Splitting the sample into the 1980s and 1990s shows that both countries with a market-based financial system and countries with a bank-based financial system moved toward a higher degree of responsiveness of consumption to changes in stock prices and house prices.
Book Synopsis Predicting Returns and Rent Growth in the Housing Market Using the Rent-to-Price Ratio by : Tom Engsted
Download or read book Predicting Returns and Rent Growth in the Housing Market Using the Rent-to-Price Ratio written by Tom Engsted and published by . This book was released on 2015 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We conduct a comprehensive international study of predictability in housing markets using the rent-price ratio as a predictive variable. On data from 18 OECD countries we generally find return predictability in accordance with time-varying risk-premia, but we also document two puzzles. First, there is a highly unstable predictive pattern in rent growth across countries and time periods. Second, the predictive patterns are highly dependent on whether housing returns and rents are measured in nominal or real terms. These results are difficult to reconcile with fully rational expectations. Among other things, the results indicate that housing markets in many countries suffer from money illusion.
Book Synopsis Analyzing the Effects of Financial and Housing Wealth on Consumption using Micro Data by : Carlos Caceres
Download or read book Analyzing the Effects of Financial and Housing Wealth on Consumption using Micro Data written by Carlos Caceres and published by International Monetary Fund. This book was released on 2019-05-24 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the existence of “wealth effects” derived from net equity (in the form of housing, financial assets, and total net worth) on consumption. The study uses longitudinal household-level data?from the Panel Study of Income Dynamics (PSID) ?covering about 7,000-9,000 households in the U.S., with the estimations carried over the period 1999-2017. Overall, wealth effects are found to be relatively large and significant for housing wealth, but less so for other types of wealth, including stocks. Furthermore, the analysis shows how these estimated marginal propensities to consume (MPC) from wealth are closely linked to household characteristics, including income and demographic factors. Finally, underlying structural changes in household characteristics point to potentially lower aggregate MPCs from wealth going forward.
Book Synopsis The Housing Boom and Bust by : Thomas Sowell
Download or read book The Housing Boom and Bust written by Thomas Sowell and published by Basic Books (AZ). This book was released on 2009-05-12 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt: Explains how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust. The "creative" financing of home mortgages and "creative" marketing of financial securities based on these mortgages to countries around the world, are part of the story of how a financial house of cards was built up--and then collapsed.
Book Synopsis Consumption, Wealth, Stock and Housing Returns by : Guglielmo Maria Caporale
Download or read book Consumption, Wealth, Stock and Housing Returns written by Guglielmo Maria Caporale and published by . This book was released on 2011 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Financial and Housing Wealth Effects on Consumption and the Role of Consumption-wealth Ratio on Stock Returns Predictability by : Iris Meco
Download or read book Essays on Financial and Housing Wealth Effects on Consumption and the Role of Consumption-wealth Ratio on Stock Returns Predictability written by Iris Meco and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Effects of Financial and Real Wealth on Consumption by : Riccardo De Bonis
Download or read book The Effects of Financial and Real Wealth on Consumption written by Riccardo De Bonis and published by . This book was released on 2011 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis National Saving and Economic Performance by : John B. Shoven
Download or read book National Saving and Economic Performance written by John B. Shoven and published by University of Chicago Press. This book was released on 2009-02-15 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt: The past decade has witnessed a decline in saving throughout the developed world—the United States has the dubious distinction of leading the way. The consequences can be serious. For individuals, their own economic security and that of their families is jeopardized. For society, inadequate rates of saving have been blamed for a variety of ills—decreasing the competitive abilities of American industry, slowing capital accumulation, increasing our trade deficit, and forcing the sale of capital stock to foreign investors at bargain prices. Restoring acceptable rates of saving in the United States poses a major challenge to those who formulate national economic policy, especially since economists and policymakers alike still understand little about what motivates people to save. In National Saving and Economic Performance, edited by B. Douglas Bernheim and John B. Shoven, that task is addressed by offering the results of new research, with recommendations for policies aimed to improve saving. Leading experts in diverse fields of economics debate the need for more accurate measurement of official saving data; examine how corporate decisions to retain or distribute earnings affect household-level consumption and saving; and investigate the effects of taxation on saving behavior, correlations between national saving and international investment over time, and the influence of economic growth on saving. Presenting the most comprehensive and up-to-date research on saving, this volume will benefit both academic and government economists.
Book Synopsis Housing Market Volatility in the OECD Area by : Tom Engsted
Download or read book Housing Market Volatility in the OECD Area written by Tom Engsted and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Empirical Evidence of the Housing Wealth Effect by : Sabine Winkler
Download or read book Empirical Evidence of the Housing Wealth Effect written by Sabine Winkler and published by . This book was released on 2016 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding the housing wealth effect is important for macroeconomic forecasting and policy setting. The paper uses cointegration theory to study the interplay between consumption, income and housing wealth in 14 countries observed quarterly from 1995 to 2013. Cointegration is found to be present in Canadian, Danish, German, Italian, Japanese and United States data, implying that the consistently estimable propensity to consume out of housing wealth is in the range of two cents per US dollar in Italy and nine cents per US dollar in Denmark. The housing wealth effect tends to be lower in countries where the income elasticity of consumption, wealth volatility and income inequality are higher. The effect tends to be larger in countries where business conditions are superior and access to credit is easier. Examining the short-run relationship between consumption, income and housing wealth highlights that transitory income moves do not Granger-cause consumption growth, and transitory housing wealth changes tend to contain information useful for predicting consumption growth in each sample country. A correlation analysis shows points of policy action aimed at influencing the housing wealth effect, and thus aggregate consumption and the economy.
Book Synopsis Has the Effect of Housing Wealth on Household Consumption Been Overestimated? New Evidences on Magnitude and Allocation by : Linna Zhu
Download or read book Has the Effect of Housing Wealth on Household Consumption Been Overestimated? New Evidences on Magnitude and Allocation written by Linna Zhu and published by . This book was released on 2019 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The effect of housing wealth on household consumption is puzzling as existing empirical results do not match with theoretical predictions. Existing theories - life cycle theory, permanent income hypothesis and user cost model - suggest that housing wealth impact should be small. However, most prior studies find that Marginal Propensity to Consume (MPC) out of housing wealth ranges between 0.04 to 0.09, indicating material impact of housing wealth on household consumption. Motivated by this discordance, this study uses the Panel Study of Income Dynamics to provide a step by step analysis to show how the housing wealth effect decreases as biases from unobserved variables are properly addressed. Once households' unobserved preferences towards consumption and their future expected income are controlled for, our estimated MPC drops significantly. We also directly control for home equity extraction to disentangle the pure wealth effect channel and the collateral channel. Our findings show that a one percent increase in perceived housing wealth is associated with 0.01-0.02 percent increase in real, non-housing consumption after directly controlling for the collateral channel. Our estimated magnitude of housing wealth effect is much smaller than previous findings. Additionally, we find heterogeneity in MPCs across consumption categories - consumptions that are necessary in daily lives such as food and transportation do not respond to changes in perceived housing wealth while households increase their spending on clothes and recreation as housing wealth increases. We also employ an IV approach to disentangle permanent and transitory housing wealth shocks. Our results indicate that it is the deviation between perceived house price appreciation rate and the real house price appreciation rate in fundamental values that drives this small magnitude of MPC out of housing wealth in the short run (in cloth and recreation) and this housing wealth effect will move towards to zero in the long run as the perception converges with the fundamental values.
Book Synopsis Wealth Effects on Household Final Consumption by : Yener Coskun
Download or read book Wealth Effects on Household Final Consumption written by Yener Coskun and published by . This book was released on 2018 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study primarily explores the linkage between wealth effects, arising from stock and housing market channels, and household final consumption for 11 advanced countries over the period from 1970 Q1 to 2015 Q4. As a modelling strategy, we employ regression analysis through the common correlated effects mean group (CCEMG) estimator, as well as Durbin-Hausman cointegration and Dumitrescu and Hurlin (2012) causality tests. The study provides various pieces of evidence through whole-panel and country-level analyses. In this respect, we find that consumption is mostly explained by income and housing wealth is positively and significantly correlated with consumption. As counter-intuitive evidence, we detect a negative linkage between consumption and stock wealth. The evidence also suggests a long-run cointegration relationship among consumption, income, interest rates, housing wealth, and stock wealth. Moreover, we find bidirectional causality between consumption and income, stock wealth, housing wealth, and interest rates. Overall, the evidence implies that housing wealth, rather than stock wealth, is the primary source of consumption growth in advanced countries.
Book Synopsis Consumption, (Dis)Aggregate Wealth, and Asset Returns by : Ricardo M. Sousa
Download or read book Consumption, (Dis)Aggregate Wealth, and Asset Returns written by Ricardo M. Sousa and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this work, I show, from the consumer's budget constraint, that the residuals of the trend relationship among consumption, financial wealth, housing wealth and labor income (summarized by the variable cday) should predict better U.K. quarterly stock market returns than a variable like cay from Lettau and Ludvigson (2001), which considers aggregate wealth instead. I show that the superior forecasting power of cday is due to: (i) its ability to track the changes in the composition of asset wealth; and (ii) the faster rate of convergence of the coefficients to the long-run equilibrium parameters. Unlike Lettau and Ludvigson (2001, 2004), the results suggest that, while financial wealth shocks are mainly transitory, fluctuations in housing wealth are very persistent. Governments and central banks should, therefore, pay special attention to the behavior of housing markets when defining macroeconomic policies.
Book Synopsis How Important is Wealth for Explaining Household Consumption Over the Recent Crisis? by :
Download or read book How Important is Wealth for Explaining Household Consumption Over the Recent Crisis? written by and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
