Modelling Wealth Effect in Consumption Function Based on System of National Acounts (SNA) Data
Main Article Content
Abstract
The study explores the influence of housing wealth, as well as other wealth variables, on consumption in the frame of permanent income lyfe cycle theory. The sample are three former socialist countries and the model used was based on models initially developed for advanced economies, most notably Norway and the Netherlands. The paper, based, where necessary, on a compiled data set, uses a more complete list of variables than similar studies and relies on comparative analysis to come to plausible results and interpret them. The results differ from those obtained in other studies for the same or similar type of countries or even the same economies, and that is that movements in values of housing stock does not influence consumption of households. In addition, the paper explains why housing wealth is not part of consumption function in former socialist countries with certain macroeconomic structure, and that is low part of unpaid mortgage debt in the financing structure of housing wealth. The reason is that mortgage financing causes the price movements of housing wealth to influence consumption, especially in developed countries where workforce is highly mobile.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Once the manuscript is accepted for publication, authors shall transfer the copyright to the publisher. If the submitted manuscript is not accepted for printing by the journal, the authors shall retain all their rights. The following rights on the manuscript are transferred to the publisher, including any supplementary materials and any parts, extracts or elements of the manuscript:
- the right to reproduce and distribute the manuscript in printed form, including print-on-demand;
- the right to print prepublications, reprints and special editions of the manuscript;
- the right to translate the manuscript into other languages;
- the right to reproduce the manuscript using photomechanical or similar means including, but not limited to photocopy, and the right to distribute these copies;
- the right to reproduce and distribute the manuscript electronically or optically using and all data carriers or storage media, and especially in machine readable/digitalized form on data carriers such as hard drive, CD-ROM, DVD, Blu-ray Disc (BD), Mini Disc, data tapes, and the right to reproduce and distribute the article via these data carriers;
- the right to store the manuscript in databases, including online databases, as well as the right to transmit the manuscript in all technical systems and modes;
- the right to make the manuscript available to the public or to closed user groups on individual demand, for use on monitors or other readers (including e-books), and in printable form for the user, either via the Internet, online service, or via internal or external networks.
Authors reserve the copyright to published articles and have the right to use the article in the same manner like third parties in accordance with the licence Attribution-Non-Commercial-Non-Derivate 4.0 International (CC BY). Thereby they must quote the basic bibliographic data of the source article published in the journal (authors, article title, journal title, volume, pagination).
References
Bårdsen, G., Eitrheim, Ø., Jansen, E. and Nymoen, R. (2010). The Econometrics of Macroeconomic Modelling. Oxford UK: Oxford University Press
Blinder, A. S., Deaton, A. (1985). “The Time Series Consumption Function Revisited. Brookings Papers on Economic Activity, 2:1985, pp. 465–521. Washington DC, USA: Brookings Institution and Princeton University
Brodin, A., Nymoen, R. (1992). “Wealth effects and Exogeneity; The Norwegian Consumption Function.” Oxford Bulletin of Economics and Statistics, 54, 3
Campbell, J.Y., Cocco, J.F. (2005). How Do House Prices Affect Consumption? Evidence From Micro Data (WP 11534, August), Cambridge, MA: NBER
Centraal Plaanbureau. (2010). Saffier II, one model voor de Nederlandse economie in 2 hoedanighedenvoor 3 toepassingen. CPB Document No 217, Decembar
Ciarlone, A. (2012). Wealth Еffects in Еmerging Еconomies. (Working Papers No 843), Rome Italy: Banca d' Italia
De Bonis, R., Silvestrini, A. (2011). The effects of financial and real wealth on consumption:new evidence from OECD countries. (Working Papers No 837), Rome Italy: Banca d' Italia
De Jong, J. (2011). De Consumptievergelijking in SAFFIER II. The Netherlands: CPB
De Nederlandsche Bank (2011). DELFI DNB’s Macroeconomic Policy Model of the Netherlands, DNB Occasional Studies, Vol. 9/No1. Amsterdam, The Netherlands: DNB
Hall, R.E. (1978). “Stochastic implication of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence“, Journal of Political Economy, Vol. 86, No. 6, pp. 971-987.
Jovanović I. (2012). “Značaj nacionalnih računa za monetarnu politiku.“ Ekonomske ideje i praksa br. 6, Septembar, Ekonomski fakultet Univerziteta u Beogradu
Jovanović I. (2016). “Modelling Consumption Based on the Complete System of National Accounts.” Economic Annals, Vol. LXI, No. 208, January-March 2016.
Kjetil O., Fredrik W. (2001). The role of assessments and judgement in the use o f the macroeconometric model RIMINI, Economic Bulletin Q 2,
Ludwig A., Slᴓk, T. (2002). The Impact of Changes in Stock Prices and House Prices on Consumption in OECD Countries. IMF Working Paper, WP/02/1
Park, C. I., Kwon, J.K (1996). “The Hyper-Inflation of Land and Consumption Behaviour. International Economic Journal, Vol. 10, No 4, Winter.
Šonje, A.A., Čeh, A.Č., Vizek, M. (2012). “Does Housing Wealth Affect Private Consumption in European Post-Transition Contries? Evidence from Linear and Treshold Models.” Post-Communist Economies. Vol 24, No.1, march 2012, 73–85.
Šonje, A.A., Čeh, A.Č., Vizek, M. (2014). “The Effect of Housing and Stock Market Wealth on Consumption in Emerging and Developed Contries.” Economic Systems 38, 433–450.
Weyerstrass, K., Haber, G., Neck, R. (2001). SLOPOL1: “A Macroeconomic model for Slovenia.” International Advances in Economic Research. February, Vol. 7, Issue 1, pp 20–37