The Impact of Changes in Stock Prices and House Priceson Consumption in OECD Countries

Ludwig, Alexander; Sloek, Torsten M

doi:10.5089/9781451841640.001

Cited by 103 publications

(85 citation statements)

References 20 publications

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“…We may also ascribe this to the budget constraint and substitution effects. As the house price increases, households who rent face higher costs and reduce their consumption and home owners who plan to buy a home may increase the down payment and future loans, resulting either in a choice of a smaller house or a lower consumption (Ludwig and Sløk 2001 Figure 4 presents the findings. The constant VAR model provides impulse response pictures that closely conform to the corresponding charts in Figure 3.…”

Section: Impulse Responsesmentioning

confidence: 99%

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Time-Varying Effects of Housing and Stock Returns on U.S. Consumption

Simo-Kengne

Miller

Gupta

et al. 2014

J Real Estate Finan Econ

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Abstract. This paper applies a time-varying parameter vector autoregressive approach to estimate the relative effects of housing and stock returns on the growth rate of US consumption over time. We use annual data from 1890 to 2012 and find that at the one-and two-year horizons and over time, generally the housing return positively affects consumption growth while the stock return negatively affects it. For the three-to six-year horizons, the two return shocks generally exert a negative, but small, effect on consumption growth. These opposite responses to changes in housing and stock returns suggest different mechanisms through which wealth affects consumption. Further, the housing return effect generally increases after 1980. The sub-period from 1980 to 2012 includes the 1997/2002 asset price boom/bust where house prices continued to rise moderately as stock prices fell. These findings suggest that the magnitude of the relative return effects differs with both time and horizons and also depends on whether prices increase or decrease.

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Section: Impulse Responsesmentioning

confidence: 99%

“…Ludwig and Sløk (2001) identify four and five different channels of influence for stock and housing prices, respectively. 1 First, the realised wealth effect implies that an increase in house (stock) prices exerts a direct positive effect on homeowners' (stockholders') consumption as a consequence of the realised gain.…”

Section: Introductionmentioning

confidence: 99%

Time-Varying Effects of Housing and Stock Returns on U.S. Consumption

Simo-Kengne

Miller

Gupta

et al. 2014

J Real Estate Finan Econ

View full text Add to dashboard Cite

show abstract

“…This crucial issue is usually discussed under the term of the consumption-wealth linkage and has been positively confirmed in several studies for the connection of financial wealth and consumption (Ludwig and Sløk, 2002;Slacalek, 2006;Kishor, 2007, Sousa 2009). Ludwig and and Sløk (2002) investigate how consumption responds to changes in financial and housing wealth in 16 OECD-countries. Using panel data techniques they report marginal propensities to consume out of stock market wealth of two till five per cent.…”

Section: Motivationmentioning

confidence: 66%

Portfolio choice of financial investors and European business cycle convergence: a panel analysis for EU countries

Belke

Schneider

2011

Empirica

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“…The rate of return for the premier real estate asset class, principle residences, is taken as the annual rate of return in the Case-Shiller Real Home Price Index (Shiller 2009). Rates of return for both of these assets have been utilized in earlier analyses (Campbell and Cocco 2007;Kennedy and Anderson 1994;Ludwig and Slok 2002).…”

Section: Data and Measuresmentioning

confidence: 99%