Journal Article

Housing Wealth and Consumption Growth: Evidence from a Large Panel of Households

Jie Gan

in The Review of Financial Studies

Published on behalf of The Society for Financial Studies

Volume 23, issue 6, pages 2229-2267
Published in print June 2010 | ISSN: 0893-9454
Published online February 2010 | e-ISSN: 1465-7368 | DOI: https://dx.doi.org/10.1093/rfs/hhp127
Housing Wealth and Consumption Growth: Evidence from a Large Panel of Households

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  • Macroeconomics: Consumption, Saving, Production, Employment, and Investment
  • Banking

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This article uses a large panel dataset that tracks the housing wealth and credit card spending of 12,793 individuals in Hong Kong to study the relationship between housing wealth and household consumption. I identify a significant effect of housing wealth on consumption. A pure wealth effect can explain part of the sensitivity: households with multiple houses have much stronger consumption responses. Consistent with a relaxation of the credit constraints, mortgage refinancing significantly increases households’ consumption sensitivities. However, for the majority of the households that do not refinance, consumption sensitivity appears to be due to a reduction in precautionary saving.

Keywords: E21; G21

Journal Article.  14702 words.  Illustrated.

Subjects: Macroeconomics: Consumption, Saving, Production, Employment, and Investment ; Banking

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