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Asymmetric Wealth Effects on Consumption: A Threshold Cointegration Approach on Swedish Households

Wülfers, Jan Folke LU (2017) NEKN01 20171
Department of Economics
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... (More)
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. (Less)
Popular 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... (More)
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. (Less)
Please use this url to cite or link to this publication:
author
Wülfers, Jan Folke LU
supervisor
organization
course
NEKN01 20171
year
type
H1 - Master's Degree (One Year)
subject
keywords
wealth effects, private consumption, PIH, cointegration, M-TAR model
language
English
id
8923914
date added to LUP
2017-09-12 11:53:23
date last changed
2017-09-12 11:53:23
@misc{8923914,
  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.},
  author       = {Wülfers, Jan Folke},
  keyword      = {wealth effects,private consumption,PIH,cointegration,M-TAR model},
  language     = {eng},
  note         = {Student Paper},
  title        = {Asymmetric Wealth Effects on Consumption: A Threshold Cointegration Approach on Swedish Households},
  year         = {2017},
}