House Price, Stock Price and Consumption in South Africa: A Structural VAR Approach

Goodness Aye (), Rangan Gupta, Alain Kaninda (), Wendy Nyakabawo () and Aarifah Razak ()
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Goodness Aye: Department of Economics, University of Pretoria
Alain Kaninda: Department of Economics, University of Pretoria
Wendy Nyakabawo: Department of Economics, University of Pretoria
Aarifah Razak: Department of Economics, University of Pretoria

No 201309, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper compares the effects of real house price and real stock price shocks on consumption decisions in South Africa over the period 1966 to 2012 using a Structural Vector Autoregressive (SVAR) approach.The sample comprises quarterly, seasonally adjusted South African data on consumption, inflation, real house price, real stock price and the nominal Treasury bill rate. We find that a positive 1 percent shock in stock prices leads to about 0.05 percent increase in consumption, with the effect being short-lived, and declines after 4 quarters to become statistically insignificant. While, a 1 percent shock in house prices increase consumption by about 0.3 percent at around the 4th quarter, but thereafter declines and becomes negative from the 8th quarter. These results show that in South Africa, house prices play economically, but not statistically, a greater role than stock prices with respect to consumption expenditure.

Keywords: Consumption; House Price; Stock Prices; Structural Vector Autoregression (search for similar items in EconPapers)
JEL-codes: C32 E21 G12 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2013-02
New Economics Papers: this item is included in nep-afr and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201309

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