Working Paper Series, Department of Economics, Uppsala University
Housing Wealth and Aggregate Consumption in Sweden
Abstract: This paper extends the VECM cointegration model and PT
(permanent-transitory) variance decomposition framework proposed by Lettau
& Ludvigson (2004) and applies them on the Swedish data spanning from
1980q1 to 2004q4. There are strong statistical evidences that the movements
of aggregate consumption, disposable income, housing wealth and financial
wealth are tied together. However, it also suggests that the short run
variations in the Swedish housing market are largely dissociated with
consumer spending. Meanwhile, it is shown that the strength of the linkage
between consumption and housing wealth is not sensitive to different model
specifications and various measures of key variables.
Keywords: housing wealth; consumption; wealth effect; VECM; PT decomposition; (follow links to similar papers)
JEL-Codes: E21; E32; E44; R31; (follow links to similar papers)
52 pages, June 10, 2006
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