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House Prices, Wealth and Consumption: New Evidence from A ustralia and C anada
Author(s) -
Atalay Kadir,
Whelan Stephen,
Yates Judith
Publication year - 2016
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12145
Subject(s) - economics , consumption (sociology) , wealth effect , collateral , aggregate (composite) , house price , monetary economics , monetary policy , social science , finance , sociology , materials science , composite material
Over the past two decades, a number of countries have experienced appreciation in house prices at the same time that aggregate consumption has increased. This paper tests alternative hypotheses for this phenomenon by using repeated household surveys from A ustralia and C anada 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 likely accounts for the observed correlation between wealth and consumption in these two countries. Rather, indirect factors such as collateral effects arising from relaxation of credit constraints are a more likely explanation.