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Re-evaluating the association between housing wealth and aggregate consumption: New evidence from Sweden
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Institute for Housing and Urban Research.
2006 (English)In: Journal of Housing Economics, ISSN 1051-1377, E-ISSN 1096-0791, Vol. 15, no 4, 321-348 p.Article in journal (Refereed) Published
Abstract [en]

This paper extends the VECM cointegration model and PT (permanent-transitory) variance decomposition framework proposed by Lettau and Ludvigson [Lettau, M., Ludvigson, S.C., 2004. Understanding trend and cycle in asset values: reevaluating the wealth effect on consumption. American Economic Review 94 (1), 276-299.] and applies them to Swedish data from 1980q1 to 2004q4. There is strong statistical evidence that the long run movements of aggregate consumption, disposable income, housing wealth, and financial wealth are tied together. However, the evidence also suggests that 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.

Place, publisher, year, edition, pages
2006. Vol. 15, no 4, 321-348 p.
Keyword [en]
Consumption, Housing wealth, PT decomposition, VECM, Wealth effect
National Category
Economics and Business
URN: urn:nbn:se:uu:diva-26246DOI: 10.1016/j.jhe.2006.10.004ISI: 000245050300004OAI: oai:DiVA.org:uu-26246DiVA: diva2:54020
Available from: 2007-02-15 Created: 2007-02-15 Last updated: 2011-02-10Bibliographically approved

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