The Impact of Housing Prices on Aggregate Consumption: Evidence from an East Asian City-State
Using aggregate consumption data for Singapore, this paper rejects the life-cycle/permanent income and myopia hypotheses as explanations for aggregate consumption behavior. We confirm the presence of liquidity constraints from the asymmetric reaction of consumption to income increases vis-a-vis inco...
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| Format: | text |
| Language: | English |
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Institutional Knowledge at Singapore Management University
2002
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| Online Access: | https://ink.library.smu.edu.sg/soe_research/1195 https://ink.library.smu.edu.sg/context/soe_research/article/2194/viewcontent/JUE20021.pdf |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | Using aggregate consumption data for Singapore, this paper rejects the life-cycle/permanent income and myopia hypotheses as explanations for aggregate consumption behavior. We confirm the presence of liquidity constraints from the asymmetric reaction of consumption to income increases vis-a-vis income declines. When we allow for asymmetric response, anticipated house price increases appear to have a dampening effect on aggregate consumption while declines in expected house price growth also had a negative effect on consumption, although the results are statistically insignificant. There is no evidence that the housing price increases have produced either wealth or collateral enhancement effects on consumption. |
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