The role of asset markets for private consumption: evidence from paneleconometric models

Arbeitspapier

We explore the long and short run relationship between private consumption, disposable income and housing and financial wealth approximated by price indices for a panel of industrialized countries. Consumption, income and wealth are cointegrated in their common, but not in their idiosyncratic components. This stresses the relevance of inter-national spillovers to explain aggregate consumption behaviour. The cointegrating vector is robust and in line with the life cycle permanent income hypothesis. The in-come elasticity does not differ from unity, and wealth elasticities are within a range of 2 to 5 percent. According to the error correction mechanism, consumption could not be interpreted as a weakly exogenous series.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 872

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models ; Macroeconomics: Consumption; Saving; Wealth ; Business Fluctuations; Cycles ; International Financial Markets
• Subject: Permanent income hypothesis ; panel cointegration ; wealth effects ; Einkommenshypothese ; Vermögenseffekt ; Panel ; Schätzung ; Industriestaaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dreger, Christian ; Reimers, Hans-Eggert
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/29754
• Last update: 10.03.2025, 11:43 AM CET