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Housing Wealth and UK Consumption
Author(s) -
Wiley-Blackwell Publishers
Publication year - 2006
Publication title -
economic outlook
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.1
H-Index - 8
eISSN - 1468-0319
pISSN - 0140-489X
DOI - 10.1111/j.1468-0319.2006.00571.x
Subject(s) - consumption (sociology) , economics , collateral , boom , unemployment , consumption function , citation , empirical research , liberalization , permanent income hypothesis , monetary economics , financial economics , microeconomics , macroeconomics , market liquidity , finance , market economy , production (economics) , sociology , law , social science , philosophy , epistemology , environmental engineering , engineering , political science
There is widespread disagreement about the role of housing wealth in explaining consumption. However, much of the empirical literature is marred by poor controls for the common drivers both of house prices and consumption, such as income, income growth expectations, interest rates, credit supply conditions, other assets and indicators of income uncertainty (e.g. changes in the unemployment rate). For instance, while the easing of credit supply conditions is usually followed by a house price boom, failure to control for the direct effect of credit liberalisation on consumption can over‐estimate the effect of housing wealth or collateral on consumption. This paper (Janine Aron, John Muellbauer and Anthony Murphyi, October 2006) estimates an empirical model for UK consumption from 1972 to 2005, grounded in theory, and with more complete empirical controls than hitherto used.