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Real Estate Market and Consumption: Macro and Micro Evidence of Japan

Kazuo Ogawa ()
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Kazuo Ogawa: Kansaigaidai University

No GRU_2020_001, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

Abstract: This study is an empirical investigation into the relationship between the real estate market and consumption in Japan. The purpose of this study is twofold. First, we investigate the channel through which the performance of the real estate market affects consumption. Using the quarterly time series data, we estimate the VAR model to pin down the transmission mechanism of land price to consumption. We find that collateral channel played an important role in propagating a shock in land price to consumption in the bubble period and the lost decades. Second, we estimate the effect of housing wealth on consumption, using the panel data of the Japan Household Panel Survey from 2009 to 2017. We find that collateral channel is still at work for young households. Our estimates of marginal propensity to consume out of housing wealth is 0.0097 to 0.0146, comparable with the estimates in the previous studies.

Keywords: land price; consumption; VAR model; wealth effect channel; collateral channel (search for similar items in EconPapers)
JEL-codes: E21 G51 R14 R21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2020-01-21
New Economics Papers: this item is included in nep-mac and nep-ure
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