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Consumption Wealth Ratio And Housing Prices
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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 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 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 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 House Prices and the Macroeconomy by : Charles Goodhart
Download or read book House Prices and the Macroeconomy written by Charles Goodhart and published by Oxford University Press. This book was released on 2007 with total page 247 pages. Available in PDF, EPUB and Kindle. Book excerpt: House price bubbles, and their aftermath, have become a focus of macro-economic policy concern in most developed countries. This book elucidates the two-way relationship between house-price fluctuations and economic fundamentals. Housing has many features which make it distinct from other assets, like equity. Real estate is not only an asset but also a durable consumption good for households, providing shelter and other housing services. As a result, a house is often the largest and most important asset of households and therefore accounts for a major share of household wealth. Similarly a large share of bank assets is tied to housing values. House price fluctuations may, therefore, have a major effect on economic activity and the soundness of the financial system. Following an introductory chapter, the book is structured into three parts. The first demonstrates the importance of house prices as determinants or indicators of inflation and economic activity. The second focuses on the inter-relationships between bank credit extension and housing prices, and how bubbles can lead to financial crises. The third discusses resultant public policy issues, such as whether, and how, to include housing prices in a general inflation index, and how to restrain the housing/bank credit cycle.
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 How Do House Prices Affect Consumption? Evidence from Micro Data by : John Y. Campbell
Download or read book How Do House Prices Affect Consumption? Evidence from Micro Data written by John Y. Campbell and published by . This book was released on 2008 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Housing is a major component of wealth. Since house prices fluctuate considerably over time, it is important to understand how these fluctuations affect households' consumption decisions. Rising house prices may stimulate consumption by increasing households' perceived wealth, or by relaxing borrowing constraints. This paper investigates the response of household consumption to house prices using UK micro data. We estimate the largest effect of house prices on consumption for older homeowners, and the smallest effect, insignificantly different from zero, for younger renters.This finding is consistent with heterogeneity in the wealth effect across these groups. It suggests that as the population ages and becomes more concentrated in the old homeowners group, aggregate consumption may become more responsive to house prices. In addition, we find that regional house prices affect regional consumption growth. Predictable changes in house prices are correlated with predictable changes in consumption, particularly for households that are more likely to be borrowing constrained, but this effect is driven by national rather than regional house prices and is important for renters as well as homeowners, suggesting that UK house prices are correlated with aggregate financial market conditions.
Book Synopsis Feeling Rich, Feeling Poor: Housing Wealth Effects and Consumption in Europe by : Mr. Serhan Cevik
Download or read book Feeling Rich, Feeling Poor: Housing Wealth Effects and Consumption in Europe written by Mr. Serhan Cevik and published by International Monetary Fund. This book was released on 2023-12-08 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: Households across Europe are struggling with a double crisis—the worst inflation shock since the World War II and a sudden correction in house prices. There is a rich literature on how housing price cycles affect consumer spending, finding mixed results with a wide range of consumption responses to changes in housing wealth. In this paper, using quarterly data on 20 countries in Europe over the period 1980–2023, we analyze the dynamic relationship between inflation-adjusted housing wealth and consumer spending and obtain statistically significant and economically intuitive results. Household consumption responds positively and swiftly to changes in real house prices and gross disposable income as expected. Using the estimated coefficients, we can deduce that the average quarter-on-quarter decline of -1.96 percent in real house prices in the first quarter of 2023 in Europe could dampen consumer spending by about -0.51 percentage points in real terms on a cumulative basis over a horizon of eight quarters.
Book Synopsis Fundamental Drivers of House Prices in Advanced Economies by : Ms.Nan Geng
Download or read book Fundamental Drivers of House Prices in Advanced Economies written by Ms.Nan Geng and published by International Monetary Fund. This book was released on 2018-07-13 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: House prices in many advanced economies have risen substantially in recent decades. But experience indicates that housing prices can diverge from their long-run equilibrium or sustainable levels, potentially followed by adjustments that impact macroeconomic and financial stability. Therefore there is a need to monitor house prices and assess whether they are sustainable. This paper focuses on fundamentals expected to drive long run trends in house prices, including institutional and structural factors. The scale of potential valuation gaps is gauged on the basis of a cross-country panel analysis of house prices in 20 OECD countries.
Book Synopsis How Large is the Housing Wealth Effect? by : Chris Carroll
Download or read book How Large is the Housing Wealth Effect? written by Chris Carroll and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a simple new method for estimating the size of 'wealth effects' on aggregate consumption. The method exploits the well-documented sluggishness of consumption growth (often interpreted as 'habits' in the asset pricing literature) to distinguish between short-run and long-run wealth effects. In U.S. data, we estimate that the immediate (next-quarter) marginal propensity to consume from a $1 change in housing wealth is about 2 cents, with a final long-run effect around 9 cents. Consistent with several recent studies, we find a housing wealth effect that is substantially larger than the stock wealth effect. We believe that our approach is preferable to the currently popular cointegration- based estimation methods, because neither theory nor evidence justifies faith in the existence of a stable cointegrating vector.
Book Synopsis Financial Market and Housing Wealth Effects on Consumption by : Arnold C S. Cheng
Download or read book Financial Market and Housing Wealth Effects on Consumption written by Arnold C S. Cheng and published by . This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this study is to examine the financial market and housing wealth effects on consumption. Housing has the dual functions as both a commodity yielding a flow of housing services and an investment asset yielding a flow of capital income. The findings from this study suggest that a rise in housing price has both a positive wealth effect and a negative price effect on consumption. While the positive wealth effect is caused by an increase in capital income, the negative price effect is caused by an increase in the cost of housing services. In addition, the housing market wealth effect increases, at the expense of the price effect, with the levels of leverage and homeownership of the housing market. These findings imply that the government policy of land supply aiming to stimulate the economy should strike a balance between the possible wealth and price effects of the housing market.
Book Synopsis Comparing Wealth Effects by : Karl E. Case
Download or read book Comparing Wealth Effects written by Karl E. Case and published by . This book was released on 2001 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of U.S. states observed quarterly during the 1980s and 1990s. We impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regressions relating consumption to income and wealth measures, finding a statistically significant and rather large effect of housing wealth upon household consumption
Book Synopsis Essays on Consumption, Saving, and Wealth Inequality by : Fang Yang
Download or read book Essays on Consumption, Saving, and Wealth Inequality written by Fang Yang and published by . This book was released on 2006 with total page 254 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis House Prices and the Macroeconomy by : Charles Goodhart
Download or read book House Prices and the Macroeconomy written by Charles Goodhart and published by OUP Oxford. This book was released on 2006-12-21 with total page 246 pages. Available in PDF, EPUB and Kindle. Book excerpt: House price bubbles, and their aftermath, have become a focus of macro-economic policy concern in most developed countries. This book elucidates the two-way relationship between house-price fluctuations and economic fundamentals. Housing has many features which make it distinct from other assets, like equity. Real estate is not only an asset but also a durable consumption good for households, providing shelter and other housing services. As a result, a house is often the largest and most important asset of households and therefore accounts for a major share of household wealth. Similarly a large share of bank assets is tied to housing values. House price fluctuations may, therefore, have a major effect on economic activity and the soundness of the financial system. Following an introductory chapter, the book is structured into three parts. The first demonstrates the importance of house prices as determinants or indicators of inflation and economic activity. The second focuses on the inter-relationships between bank credit extension and housing prices, and how bubbles can lead to financial crises. The third discusses resultant public policy issues, such as whether, and how, to include housing prices in a general inflation index, and how to restrain the housing/bank credit cycle.
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 The Blackwell Companion to the Economics of Housing by : Susan J. Smith
Download or read book The Blackwell Companion to the Economics of Housing written by Susan J. Smith and published by John Wiley & Sons. This book was released on 2010-01-22 with total page 648 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Blackwell Companion to the Economics of Housing willhelp students and professionals alike to explore key elements ofthe housing economy: home prices, housing wealth, mortgage debt,and financial risk. Features 24 original essays, including an editorialintroduction and three section overviews Includes 39 world-class authors from a mix of educational andfinancial organizations in the UK, Europe, Australia, and NorthAmerica Broadly-based, scholarly, and accessible, serving students andprofessionals who wish to understand how today’s housingeconomy works Profiles the role and relevance of housing wealth; themismanagement of mortgage debt; and the pitfalls and potential ofhedging housing risk Key topics include: the housing price bubble and crash; thesubprime mortgage crisis in the US and its aftermath; the linksbetween housing wealth, the macroeconomy, and the welfare ofhome-occupiers; the mitigation of credit and housing investmentrisks Specific case studies help to illustrate concepts, along withnew data sets and analyses to illustrate empirical points
Book Synopsis Housing Collateral, Consumption Insurance and Risk Premia by : Hanno Lustig
Download or read book Housing Collateral, Consumption Insurance and Risk Premia written by Hanno Lustig and published by . This book was released on 2003 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a model with housing collateral, the ratio of housing wealth to human wealth shifts the conditional distribution of asset prices and consumption growth. A decrease in house prices reduces the collateral value of housing, increases household exposure to idiosyncratic risk, and increases the conditional market price of risk. Using aggregate data for the US, we find that a decrease in the ratio of housing wealth to human wealth predicts higher returns on stocks. Conditional on this ratio, the covariance of returns with aggregate risk factors explains eighty percent of the cross-sectional variation in annual size and book-to-market portfolio returns. A data appendix for this paper is a href="http://www.nber.org/data-appendix/w99 59"available/a href.
