Euro area private consumption: Is there a role for housing wealth effects

This paper adds to the literature on wealth effects on consumption by disentangling financial wealth effects from housing wealth effects for the euro area. We use two macro-datasets for our estimations, one on the aggregate euro area for the period 1980-2006, and one on the individual euro area countries from1995-2006, using panel data techniques. The impact of all wealth variables on euro area consumption is significant and positive in most specifications for both datasets. The marginal propensity to consume (MPC) out of financial wealth is roughly in line with the literature, with 2.4 to 3.6 cents per euro of financial wealth spent on consumption according to the estimations with euro area aggregate data. However, the panel estimation yields somewhat lower results (0.6 to 1.1 cents). The MPC out of nomina...

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Year of publication:	2009-05-26
Authors:	Skudelny, Frauke
Institutions:	European Central Bank
Published in:	Working papers published in 2009 ECB Working Paper Series No 1057, May 2009
Subject:	Eurokapitalmarkt \| Verbrauch

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Abstract
Non-technical summary
1 Introduction
2 Empirical results in the literature
3 Theoretical considerations
4 Empirical results
4.1 Data
4.2 Estimated model
4.3 Aggregate euro area results
4.4 Panel data results
5 Concluding remarks
6 References
Appendices
European Central Bank Working Paper Series