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Disaggregate Wealth and Aggregate Consumption: an Investigation of Empirical Relationships for the G7*
Author(s) -
Byrne Joseph P.,
Philip Davis E.
Publication year - 2003
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.00044
Subject(s) - consumption (sociology) , economics , aggregate (composite) , debt , wealth elasticity of demand , econometrics , national wealth , wealth effect , consumption function , household debt , aggregate behavior , monetary economics , financial economics , macroeconomics , aggregate demand , finance , fiscal policy , monetary policy , materials science , sociology , composite material , social science
To date, studies of wealth effects on consumption have mainly used aggregate wealth definitions on a single‐country basis. This study seeks to break new ground by analysing disaggregated financial wealth in consumption functions for G7 countries. Contrary to earlier empirical work, we find that illiquid financial wealth (i.e. securities, pensions and mortgage debt) tends to be a more important long‐run determinant of consumption than liquid financial wealth. These results imply potential instability in consumption functions employing aggregate wealth. Our results are robust using SURE; when testing with a nested specification; and when using a linear model.