Housing Prices, Mortgage Payments and Savings Behavior in Taiwan: A Time Series Analysis

Chu‐Chia Lin and Yi‐Fang Lai

Asian Economic Journal, 2003, vol. 17, issue 4, 407-425

Abstract: After reaching its peak at the year of 1987, the saving rate of Taiwan dropped quickly in the late 1980s. At the same time, the real average housing prices in Taiwan had increased almost three times from 1987 to 1990. Why did the savings rate in Taiwan drop so quickly after 1987? Does it relate to the dramatic increase in housing prices? Although it has been confirmed that there is a negative wealth effect of housing price appreciation on savings, the estimated wealth effect on savings could be biased if the effect of mortgage payment (also known as forced savings) on saving is neglected. Applying quarterly data from 1981 to 2000 in Taiwan, we employ a time series analysis to compare two saving models, the traditional one and the one with forced saving. As we expected, the negative wealth effect of housing price appreciation on saving is smaller in the forced saving model than in the traditional saving model. By the estimated error correction models (ECMs), ignoring the impact of housing price appreciation on forced saving, the speed of short‐run adjustment in total saving would be significantly slower. For forecasting purposes, the forecast errors in ECM of the forced saving model are smaller than that in the total savings model.

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://doi.org/10.1111/j.1467-8381.2003.00193.x

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:bla:asiaec:v:17:y:2003:i:4:p:407-425

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1351-3958

Access Statistics for this article

Asian Economic Journal is currently edited by Sung Yun-Wing and Shigeyuki Abe

More articles in Asian Economic Journal from East Asian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().