The effects of financial and real wealth on consumption: new evidence from OECD countries

Riccardo De Bonis and Andrea Silvestrini

No 837, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper we present new estimates of the effect of households� financial and real wealth on consumption. The analysis makes reference to eleven OECD countries and takes into account quarterly data from 1997 to 2008. Unlike most of the previous literature on European countries, we measure financial wealth using quarterly harmonized data on households� financial assets and liabilities, which have been gleaned from the flow of funds. For comparison, we also employ national share price indices as a proxy for financial wealth. We rely on 1) standard static panel and 2) single-country level autoregressive distributed lag estimations. Furthermore, we implement a recent econometric approach that allows for more flexible assumptions in the non-stationary panel framework under consideration. Our results show that both net financial wealth and real wealth have a positive effect on consumption. Overall, the influence of net financial assets is stronger than that of real assets.

Keywords: consumption; household financial and real wealth; wealth effects; panel cointegration. (search for similar items in EconPapers)
JEL-codes: C23 E21 E44 (search for similar items in EconPapers)
Date: 2011-11
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The effects of financial and real wealth on consumption: new evidence from OECD countries (2012)
Working Paper: The Effects of Financial and Real Wealth on Consumption: New Evidence from OECD Countries (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_837_11

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