Using aggregate consumption data for Singapore, this paper rejects the life-cycle/permanent income and myopia hypotheses as explanations for aggregate consumption behavior. We confirm the presence of liquidity constraints from the asymmetric reaction of consumption to income increases vis-a-vis income declines. When we allow for asymmetric response, anticipated house price increases appear to have a dampening effect on aggregate consumption while declines in expected house price growth also had a negative effect on consumption, although the results are statistically insignificant. There is no evidence that the housing price increases have produced either wealth or collateral enhancement effects on consumption.
Housing wealth effects, consumption, Singapore, liquidity constraints, collateral enhancement
Asian Studies | Public Economics | Real Estate
Singapore Management University, School of Economics. Working Paper Series, Paper No. 10-2002
City or Country
The Impact of Housing Prices on Aggregate Consumption: Evidence from an East Asian City-State. (2002). Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/1195
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