Σύνοψη

HOUSING WEALTH, HOUSEHOLD DEBT AND FINANCIAL ASSETS: ARE THERE IMPLICATIONS FOR CONSUMPTION?

Konstantina Manou

Bank of Greece

Panagiotis Palaios

National and Kapodistrian University of Athens

Evangelia Papapetrou

Bank of Greece and National and Kapodistrian University of Athens

Abstract

This paper evaluates the asymmetric transmission effects of housing wealth, household debt and financial assets on consumption spending in Greece over the period 1999Q4 to 2017Q4. We apply the Enders and Siklos (2001) methodology and use Stevans’s (2004) modification to capture these effects in a multivariate framework. Our results show that consumption responds asymmetrically to all types of changes applied. We provide evidence for the predominance of negative changes compared to positive ones. Our empirical findings are consistent with a stronger consumption response to decreases in financial assets and housing wealth. Furthermore, our results add to the existing literature in that the driving force of the rapidly reducing consumption spending is the deleveraging change. We also check the robustness of our results by applying Hansen’s (2017) kink regression model analysis. The empirical results provide evidence that consumption and wealth component data fit better a threshold model than a linear model.

Keywords: Consumption, financial wealth, housing wealth, household debt, asymmetric adjustment

JEL Classification: E21, E44, D12

Acknowledgements: The authors are grateful to Stephen Hall and Heather Gibson for helpful comments and suggestions. The views expressed are those of the authors and not those of their respective institutions.

Correspondence:

Evangelia Papapetrou

Economic Analysis and Research

Bank of Greece

21 El. Venizelos Avenue

10250 Athens, Greece

Tel.: +30 210 320 2377

email: epapapetrou@bankofgreece.gr