Consumption, personal income, financial wealth, housing wealth, and long-term interest rates: A panel cointegration approach for 50 US states

Dimitra Kontana () and Stilianos Fountas
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Dimitra Kontana: Department of Economics, University of Macedonia

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: This study investigates the long-run and short-run relationship between consumption, income, financial and housing wealth, and a long-term interest rate for the 50 US states. Using an updated set of quarterly data from 1975 to 2018, we perform panel cointegration analysis allowing for cross-sectional dependence. We obtain the following results. First, there is strong evidence for cointegration among consumption and its determinants. Second, estimates of the housing wealth and financial wealth elasticity of consumption range from 0.072 to 0.115 and 0.044 to 0.080, respectively. Finally, Granger causality tests show that there is a bidirectional short-term causality between per capita consumpti on, income, and financial wealth in the short run and between all the variables in the long run.

Keywords: Consumption; Financial Wealth; Housing Wealth; Wealth effects; 10-year Treasury Constant Maturity Rate; Panel Cointegration; Granger Causality. (search for similar items in EconPapers)
JEL-codes: E21 E44 R31 (search for similar items in EconPapers)
Date: 2021-09, Revised 2021-09
New Economics Papers: this item is included in nep-cwa, nep-fdg, nep-isf, nep-mac and nep-ure
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Journal Article: Consumption, personal income, financial wealth, housing wealth, and long-term interest rates: a panel cointegration approach for 50 US states (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:mcd:mcddps:2021_10

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