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| Author: | Attanasio, O.P. (et al.) |
| Title: | Booms and busts: Consumption, house prices and expectations |
| Journal: | Economica
2009 : FEB, VOL. 76:301, p. 20-50 |
| Index terms: | prices consumption growth wealth expectations housing |
| Language: | eng |
| Abstract: | During the past 25 years, house price and consumption growth have been closely synchronized. This article proposes three hypotheses for this. First of all, increases in house prices raise household wealth and so their consumption. Secondly, house price growth reduces credit constraints by increasing the collateral available to homeowners. The last hypothesis is that the relationship between house prices and consumption is stronger for younger than older households, contradicting the wealth channel. This study suggests that common causality has been the most important factor linking house prices and consumption. |
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