No. 147. THE EFFECTS OF FINANCIAL AND HOUSING WEALTH ON PRIVATE CONSUMPTION IN GREECE
E. Αthanassiou, E. Tsouma. 2015.
In the light of the considerable changes in household financial and housing wealth in Greece during the past fifteen years, and given the high share of private consumption in Greek GDP, as well as its decisive role in shaping developments in GDP over this period, this paper investigates the effects of household wealth on consumption expenditure. We disentangle financial wealth effects from housing wealth effects, to assess separately the impact of these two wealth components on consumption. This type of analysis is conducted for the first time for the case of Greece, and contributes to the relevant literature on wealth effects on consumption. The analysis employs quarterly data for the time period 2000-2014, including a series on housing wealth in Greece constructed for the purpose of the paper. The results of the analysis point to the existence of a statistically significant cointegrating relationship between consumption and wealth, with a positive housing wealth effect in the long run. In the short-run both financial and housing wealth appear to play a role in determining consumption, with the importance of housing wealth being higher compared to that of financial wealth.