Disaggregate Wealth and aggregate consumption: an investigation of empirical relationships for the

Professor E. Philip Davis ()
Authors registered in the RePEc Author Service: Martin Robert Weale ()

No 180, National Institute of Economic and Social Research (NIESR) Discussion Papers from National Institute of Economic and Social Research

Abstract: To date, testing for wealth effects in consumption has mainly used aggregate wealth definitions, and/or is on a single-country basis. This study breaks new ground by analysing disaggregated wealth in consumption functions for G7 countries. Contrary to other empirical work, illiquid financial wealth, (securities, pensions and mortgage debt), tends to be a more significant long-run determinant of consumption than liquid financial wealth. We suggest that this pattern reflects a shift from liquidity constrained to life cycle behaviour following financial liberalisation. Results were robust in SURE analysis, tested in a nested manner, using varying definition of liquid assets and using non-property income instead of personal disposable income. Wald tests indicate similar long-run behaviour for all EU countries including the UK.

Date: 2001-01
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Persistent link: https://EconPapers.repec.org/RePEc:nsr:niesrd:180

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