The Effect of House Prices on Consumption: Evidence from Micro Panel Data on Mortgage Borrowers (in Korean)

Sungho Choi (), SangYoon Song () and Youngsik Kim ()
Additional contact information
Sungho Choi: Korea Credit Bureau Research Center
SangYoon Song: Department of Economics, Seoul National University
Youngsik Kim: Department of Economics, Seoul National University

Economic Analysis (Quarterly), 2015, vol. 21, issue 2, 1-27

Abstract: This paper examines the response of household consumption to house prices using South Korea household-level micro data that contain comprehensive information on homeowner's income, expenditure, debt repayments and demographic factors in the 2008-2014 waves. The dynamic panel method is used to consider the dynamic characteristics of consumption, and the system GMM method is applied to control the endogeneity problem. The main results are as follows. First, the house prices are significantly and positively related to consumption. The magnitude of the effect, however, is smaller than that of the change in income level. Second, the sensitivity of consumption to housing wealth is relatively high in groups with higher income, lower DTI, older age or having experienced the increasing-trend of house prices. Especially, the changes of house prices hardly affect consumption in groups with relatively higher DTI or lower income. Third, the effect of relaxing borrowing constraints by rising house prices is positively correlated with consumption, particularly for households that are more likely to be borrowing constrained owing to relatively higher LTV close to regulatory cap, lower income, and being the self-employed.

Keywords: System GMM; House prices; Wealth effect; Consumption; Borrowing constraint (search for similar items in EconPapers)
JEL-codes: C23 D12 E21 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.bok.or.kr/ucms/cmmn/file/fileDown.do?m ... 00001016838&fileSn=1 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bok:journl:v:21:y:2015:i:2:p:1-27

Access Statistics for this article

Economic Analysis (Quarterly) is currently edited by Wook Sohn, Hwan-koo Kang and Jaerang Lee

More articles in Economic Analysis (Quarterly) from Economic Research Institute, Bank of Korea Contact information at EDIRC.
Bibliographic data for series maintained by Economic Research Institute ().