It’s Not All Fiscal: Effects of Income, Fiscal Policy, and Wealth on Private Consumption
May 26, 2015
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Summary
We attempt to disentangle income and wealth effects on consumption by disaggregating both the different types of income and wealth. We estimate a consumption function for a panel of quarterly data for 14 advanced economies spanning 1998 to 2012, using an error correction specification. We find a significant long-term relation between consumption and the different components of income and wealth. While fiscal policy had direct effects on consumption, the analysis suggests that wealth effects were sizeable, and therefore need to be kept in mind when analyzing consumption trends going forward.
Subject: Consumption, Housing, Income, National accounts, Private consumption, Social security contributions, Taxes
Keywords: Consumption, consumption growth, financial assets, fiscal policy, Global, household debt, Housing, housing assets, Income, Labor income, Private consumption, Social security contributions, wealth, wealth effects, wealth variable, WP
Pages:
30
Volume:
2015
DOI:
Issue:
112
Series:
Working Paper No. 2015/112
Stock No:
WPIEA2015112
ISBN:
9781513584744
ISSN:
1018-5941
