 Financial market and housing wealth effects on consumption: a permanent income approachArnold Cheng and Michael Fung Applied Economics, 2008, vol. 40, issue 23, 3029-3038 Abstract: The objective of this study is to examine the financial market and housing wealth effects on consumption. Housing has the dual functions as both a commodity yielding a flow of housing services and an investment asset yielding a flow of capital income. With the construction of an empirical framework based on the vector autoregression approach, the findings from this study suggest that a rise in housing price has both a positive wealth effect and a negative price effect on consumption. While the positive wealth effect is caused by an increase in capital income, the negative price effect is caused by an increase in the cost of housing services. In addition, the housing market wealth effect increases, at the expense of the price effect, with the level of housing-market leverage. These findings imply that the government policy of land supply aiming to stimulate the economy should strike a balance between the possible wealth and price effects of the housing market. Date: 2008 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:40:y:2008:i:23:p:3029-3038 Ordering information: This journal article can be ordered from DOI: 10.1080/00036840600994021 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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