What Drives Personal Consumption? The Role of Housing and Financial Wealth

Abstract

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Wealth effects in emerging market economies

“…Thaler (1990), Sheiner (1995), and Hoynes and McFadden (1997) investigate the correlation between individual savings rates and changes in house prices and …nd a weak relation. Slacalek (2006) shows that housing wealth e¤ects are smaller than …nancial wealth e¤ects for most countries, with the notable exceptions of the US and the UK. In contrast, Case (1992), Kent Despite the wide evidence on wealth e¤ects for developed countries, little attention has been given to emerging markets, a gap that we try to address in the present work.…”

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

“…Otherwise, investment strategies would have no influence and our empirical investigation would not be appropriate. 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.…”

“…The sample of 16 countries used by Slacalek (2006) covers most countries of our sample as well. The results suggest that first, a rise in wealth raises consumption on average by 5 per cents, second, that the individual country changes are dependent on the financial system (market based economies exhibit a higher responsiveness) and third, that financial wealth has a higher effect on consumption as housing wealth in the EMU countries of the sample.…”

Global imbalances and household savings: The role of wealth

“…8 This idea has been exploited by other authors too. For example, Slacalek (2006) uses similar data but claims to be able to construct a measure comparable to the financial wealth one in order to compare the magnitude of the two different wealth effects. However, we believe that in order to do this he makes certain strong assumptions that we prefer to avoid.…”