Title: Asymmetric Wealth Effects on Consumption: A Threshold Cointegration Approach on Swedish Households
Abstract: Recognising the macroeconomic importance of private consumption, this thesis aims at
examining possible forces that drive changes the level of households’ consumption. I do so by
analysing the relationship of housing wealth, financial wealth, and consumption of households
in Sweden in the short and long run. Using an M-TAR approach I find evidence for
cointegration of these variables. Housing wealth and financial wealth appear to have positive
effects on total consumption in the long run. Consumption is the error-correcting variable in the
short run. However, without taking control variables into account, asymmetric disequilibrium
adjustment cannot be verified significantly. Introducing broad money supply, to control for
financial market conditions, results in weak evidence for the existence of asymmetric
adjustment of total private consumption. Overall, housing wealth effects and financial wealth
effects seem to play an important role in explaining changes in the level of consumption, and
thus are of relevance for policymakers in the macroeconomy.
Publication Year: 2017
Publication Date: 2017-01-01
Language: en
Type: article
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