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The Effect of House Price Changes on Cohort Consumption in Turkey

Evren Ceritoğlu ()

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This paper analyzes the relationship between house prices and household consumption in Turkey. We utilize twelve consecutive waves of the Turkish Statistical Institute (TURKSTAT) Household Budget Surveys (HBS) from 2003 to 2014. We construct a pseudo-panel data set using birth-year cohorts following Deaton (1985). We find that house price changes have a positive and significant effect on the growth of cohort consumption. Moreover, the effect of house price changes is stronger for home-owners and it intensifies as we move from young cohorts to old cohorts. We observe that there is a marginally significant and relatively weak relationship between the growth of cohort consumption and house price changes for tenants. However, our pooled sample set is restricted to young and middle-aged cohorts for tenants. In addition, we find that the rise of home-ownership ratio increases the growth of cohort consumption, while the spread of having outstanding housing debt depresses the growth of cohort consumption. Therefore, our empirical findings are in favor of the wealth channel argument.

Keywords: House prices; Cohort consumption; Birth-year cohorts; Pseudo-panel (search for similar items in EconPapers)
JEL-codes: C23 D12 R21 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-ara and nep-ure
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