It’s Not All Fiscal: Effects of Income, Fiscal Policy, and Wealth on Private Consumption

Laura Jaramillo and Alexandre Chailloux

No 2015/112, IMF Working Papers from International Monetary Fund

Abstract: We attempt to disentangle income and wealth effects on consumption by disaggregating both the different types of income and wealth. We estimate a consumption function for a panel of quarterly data for 14 advanced economies spanning 1998 to 2012, using an error correction specification. We find a significant long-term relation between consumption and the different components of income and wealth. While fiscal policy had direct effects on consumption, the analysis suggests that wealth effects were sizeable, and therefore need to be kept in mind when analyzing consumption trends going forward.

Keywords: WP; Labor income; housing assets; wealth variable; Consumption; fiscal policy; wealth; financial assets; household debt; consumption growth; wealth effects; Income; Private consumption; Social security contributions; Housing; Global (search for similar items in EconPapers)
Pages: 30
Date: 2015-05-26
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Citations: View citations in EconPapers (1)

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