The Impact of Changes in Stock Prices and House Priceson Consumption in OECD Countries

January 1, 2002

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Alexander Ludwig, and Torsten M Sloek. The Impact of Changes in Stock Prices and House Priceson Consumption in OECD Countries, (USA: International Monetary Fund, 2002) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper quantifies the different impact of stock and house prices on consumption using data for 16 OECD countries. The analysis finds that the long-run impact of an increase in stock prices and house prices is in general higher in countries with a market-based financial system. The sensitivity of consumption to changes in stock wealth is about twice as large as the sensitivity to changes in housing wealth. Splitting the sample into the 1980s and 1990s shows that both countries with a market-based financial system and countries with a bank-based financial system moved toward a higher degree of responsiveness of consumption to changes in stock prices and house prices.

Subject: Asset prices, Consumption, Financial markets, Housing, Housing prices, National accounts, Prices, Stock markets

Keywords: Adjustment coefficient, Asset prices, Coefficient estimate, Consumption, Consumption function, Estimation result, Europe, House price, Housing, Housing prices, Panel cointegration, Price change, Price data, Reasonable coefficient estimate, Robustness of the housing price estimate, Run coefficient, Stock market price, Stock market price elasticity, Stock market wealth, Stock markets, Stock option, Wealth effect, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/001
Stock No:

WPIEA0012002
ISBN:

9781451841640
ISSN:

1018-5941

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