House prices, collateral constraint, and the asymmetric effect on consumption

Nan-Kuang Chen (), Shiu-Sheng Chen and Yu-Hsi Chou

Journal of Housing Economics, 2010, vol. 19, issue 1, 26-37

Abstract: This paper investigates the asymmetric effect of house prices on various categories of consumption under constrained and unconstrained regimes. We first present a simple theoretical model based on Iacoviello (2004) and Luengo-Prado (2006), explicitly considering the dual role of housing and linking credit constraints to the behavior of consumption in a pair of aggregate Euler equations. We then estimate a threshold regression model and find that LC-PIH holds only under the unconstrained regime. More importantly, durable consumption exhibit a very strong asymmetric effect in response to changes in house prices, while other categories of consumption do not exhibit this asymmetry.

Keywords: Permanent; income; hypothesis; Collateral; constraint; House; prices; Threshold; regression (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:19:y:2010:i:1:p:26-37

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