Disaggregate income and wealth effects on private consumption in Greece

Dimitrios Sideris () and Georgia Pavlou
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Dimitrios Sideris: Bank of Greece and Panteion University
Georgia Pavlou: Bank of Gerece

No 293, Working Papers from Bank of Greece

Abstract: The aim of the present paper is to identify the main determinants of private consumption in Greece for the recent period 2003:Q1- 2020:Q1. The issue is of particular interest for Greece, now that the economy is trying to return to a sustainable growth path following the pandemic episode, since private consumption constitutes the main component of Greek GDP. The study analyses the determinants of private consumption, paying particular attention to the significance of income and wealth. The major novelty of the paper with respect to the Greek literature on consumption is that it assumes that different types of income play a different role in consumers’ behavior: so, disposable income is decomposed into its labour and non-labour components. To this end, four alternative measures of labour income are computed based on quarterly non-financial accounts data of the households’ sector. The results indicate that decomposing disposable income is essential for analyzing private consumption. Labour income turns out to be the most important determinant of private consumption in Greece in the long and the short run. Thus, labour income should primarily be monitored and targeted by the policy makers, in their policies aiming at domestic demand and GDP growth.

Keywords: Private Consumption; Labour income; Wealth; Cointegration; Error correction model. (search for similar items in EconPapers)
JEL-codes: C22 D12 E21 E44 (search for similar items in EconPapers)
Pages: 52
Date: 2021-11
New Economics Papers: this item is included in nep-mac
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