Housing Wealth and Household Consumption: New Evidence from Australia and Canada

Kadir Atalay, Stephen Whelan () and Judith Yates

No 2013-04, Working Papers from University of Sydney, School of Economics

Abstract: Over the past two decades a number of countries have experienced an increase in house prices at the same time that aggregate consumption has been observed to increase. Alternative hypotheses have been put forward to explain this pattern. In this paper we test these hypotheses by using repeated Household Expenditure Surveys from Canada and Australia to identify the transmission mechanism that links consumption and household wealth. The empirical analysis suggests that neither a direct wealth effect nor a common causal factor is a likely explanation for the observed correlation between wealth and consumption. Rather, indirect factors such as relaxation of credit constraints are more likely explanations.

Keywords: common causality; collateral effects; wealth effects; household consumption; House prices (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:syd:wpaper:2123/8975

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