Housing booms, non-financial wealth and consumption: lessons from the Australian experience

Lance A. Fisher; Glenn Otto; Graham M. Voss

Housing booms, non-financial wealth and consumption: lessons from the Australian experience

Lance A. Fisher, Glenn Otto, Graham M. Voss

Research output: Chapter in Book/Report/Conference proceeding › Conference proceeding contribution › peer-review

Abstract

Since a relatively high share of private wealth in Australia is held in the form of housing, we extend the approach of Lettau and Ludvigson (2004) to estimate the transitory component of both financial and non-financial (mainly housing) wealth. We estimate the transitory component of non-financial wealth to be large relative to the transitory component of consumption and find little evidence that private consumption expenditure significantly responds to transitory fluctuations in either total or non-financial wealth. We conclude that Australian households have largely ignored the effect of cyclical fluctuations in house prices on their wealth when choosing their consumption path.

Original language	English
Title of host publication	Proceedings of the 35th Australian Conference of Economists
Editors	Garry MacDonald Harry Block
Place of Publication	Perth
Publisher	Curtin University of Technology
Number of pages	40
ISBN (Print)	1740675010
Publication status	Published - 2006
Externally published	Yes
Event	Australian Conference of Economists (35th : 2006) - Perth Duration: 25 Sept 2006 → 27 Sept 2006

Conference

Conference	Australian Conference of Economists (35th : 2006)
City	Perth
Period	25/09/06 → 27/09/06

Keywords

consumption
wealth
housing wealth
cointegration
permanent and transitory

Cite this

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title = "Housing booms, non-financial wealth and consumption: lessons from the Australian experience",

abstract = "Since a relatively high share of private wealth in Australia is held in the form of housing, we extend the approach of Lettau and Ludvigson (2004) to estimate the transitory component of both financial and non-financial (mainly housing) wealth. We estimate the transitory component of non-financial wealth to be large relative to the transitory component of consumption and find little evidence that private consumption expenditure significantly responds to transitory fluctuations in either total or non-financial wealth. We conclude that Australian households have largely ignored the effect of cyclical fluctuations in house prices on their wealth when choosing their consumption path.",

keywords = "consumption, wealth, housing wealth, cointegration, permanent and transitory",

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year = "2006",

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editor = "{Harry Block}, {Garry MacDonald}",

booktitle = "Proceedings of the 35th Australian Conference of Economists",

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note = "Australian Conference of Economists (35th : 2006) ; Conference date: 25-09-2006 Through 27-09-2006",

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Housing booms, non-financial wealth and consumption: lessons from the Australian experience. / Fisher, Lance A.; Otto, Glenn; Voss, Graham M.
Proceedings of the 35th Australian Conference of Economists. ed. / Garry MacDonald Harry Block. Perth: Curtin University of Technology, 2006.

Research output: Chapter in Book/Report/Conference proceeding › Conference proceeding contribution › peer-review

TY - GEN

T1 - Housing booms, non-financial wealth and consumption

T2 - Australian Conference of Economists (35th : 2006)

AU - Fisher, Lance A.

AU - Otto, Glenn

AU - Voss, Graham M.

PY - 2006

Y1 - 2006

N2 - Since a relatively high share of private wealth in Australia is held in the form of housing, we extend the approach of Lettau and Ludvigson (2004) to estimate the transitory component of both financial and non-financial (mainly housing) wealth. We estimate the transitory component of non-financial wealth to be large relative to the transitory component of consumption and find little evidence that private consumption expenditure significantly responds to transitory fluctuations in either total or non-financial wealth. We conclude that Australian households have largely ignored the effect of cyclical fluctuations in house prices on their wealth when choosing their consumption path.

AB - Since a relatively high share of private wealth in Australia is held in the form of housing, we extend the approach of Lettau and Ludvigson (2004) to estimate the transitory component of both financial and non-financial (mainly housing) wealth. We estimate the transitory component of non-financial wealth to be large relative to the transitory component of consumption and find little evidence that private consumption expenditure significantly responds to transitory fluctuations in either total or non-financial wealth. We conclude that Australian households have largely ignored the effect of cyclical fluctuations in house prices on their wealth when choosing their consumption path.

KW - consumption

KW - wealth

KW - housing wealth

KW - cointegration

KW - permanent and transitory

M3 - Conference proceeding contribution

SN - 1740675010

BT - Proceedings of the 35th Australian Conference of Economists

A2 - Harry Block, Garry MacDonald

PB - Curtin University of Technology

CY - Perth

Y2 - 25 September 2006 through 27 September 2006

ER -

Housing booms, non-financial wealth and consumption: lessons from the Australian experience

Abstract

Conference

Keywords

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