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- Title
How important are wealth effects on consumption in Canada?
- Authors
Kichian, Maral; Mihic, Milana
- Abstract
Abstract: We estimate the marginal propensity to consume from financial and housing wealth in Canada. The modelling framework of Carroll et al. (2011) that builds on the observed stickiness in consumption data is used. Estimations and inferences are conducted using identification‐robust methods. The results provide support for the overall modelling strategy, but there are also important differences in the identification status of the econometric equations considered. Based on the most informative specification, we find that both types of wealth—financial and housing—have significant effects in Canada and that the former has a greater effect than the latter. A simple extension of the model that also accounts for non‐price credit conditions shows that housing wealth may be relevant only during periods of easier access to credit. Finally, we find support for relatively high stickiness in consumption growth in Canada.
- Subjects
CONSUMPTION (Economics); WEALTH; CANADIAN economy; PERSONAL finance; HOUSING; ECONOMETRICS
- Publication
Canadian Journal of Economics, 2018, Vol 51, Issue 3, p784
- ISSN
0008-4085
- Publication type
Article
- DOI
10.1111/caje.12338