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Housing and Financial Wealth, Financial Deregulation and Consumption--The Swedish Case

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  • Berg, Lennart
  • Bergstrom, Reinhold

Abstract

The effects of using wealth disaggregated as housing and net financial wealth are investigated in an error-correction function model. Data for Sweden 1970-92 are used in the analysis. Unit root tests indicate that consumption, income, and wealth are all integrated of order one and that the variables cointegrate if wealth is disaggregated. Financial wealth is crucial in explaining consumption, and wealth in disaggregated form improves the models significantly. Household debt is an important determinant of short-run behavior indicating credit rationing. There is also evidence that the observed dramatic increase in savings is a consequence of the recent tax reform. Copyright 1995 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Berg, Lennart & Bergstrom, Reinhold, 1995. "Housing and Financial Wealth, Financial Deregulation and Consumption--The Swedish Case," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 421-439, September.
    • Handle: RePEc:bla:scandj:v:97:y:1995:i:3:p:421-39
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    Cited by:

    1. Barot, Bharat, 2002. "Growth and Business Cycles for the Swedish Economy 1963-1999," Working Papers 79, National Institute of Economic Research.
    2. Engelbert Stockhammer & Erik Bengtsson, 2020. "Financial effects in historic consumption and investment functions," International Review of Applied Economics, Taylor & Francis Journals, vol. 34(3), pages 304-326, May.
    3. Chen, Jie, 2006. "Housing Wealth and Aggregate Consumption in Sweden," Working Paper Series 2006:16, Uppsala University, Department of Economics.
    4. Juan Nicolás Hernández A, 2006. "Revisión de los determinantes macroeconómicos del consumo total de los hogares para el caso colombiano," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 24(52), pages 80-109, December.
    5. Ms. Rima A Turk, 2015. "Housing Price and Household Debt Interactions in Sweden," IMF Working Papers 2015/276, International Monetary Fund.
    6. Bharat Barot, 2001. "An Econometric Demand–Supply Model For Swedish Private Housing," European Journal of Housing Policy, Taylor and Francis Journals, vol. 1(3), pages 417-444.
    7. Emilia Gyoerk, 2017. "Economic Costs and Benefits of EMU Membership from the Perspective of a Non-member," Open Economies Review, Springer, vol. 28(5), pages 893-921, November.
    8. Morris A. Davis & Michael G. Palumbo, 2001. "A primer on the economics and time series econometrics of wealth effects," Finance and Economics Discussion Series 2001-09, Board of Governors of the Federal Reserve System (U.S.).
    9. Englund, Peter & Ioannides, Yannis M., 1997. "House Price Dynamics: An International Empirical Perspective," Journal of Housing Economics, Elsevier, vol. 6(2), pages 119-136, June.
    10. Berg Lennart & Bergström Reinhold, 1996. "Consumer Confidence and Consumption in Sweden," Working Paper Series 1996:7, Uppsala University, Department of Economics.
    11. Chen, Jie, 2006. "Re-evaluating the association between housing wealth and aggregate consumption: New evidence from Sweden," Journal of Housing Economics, Elsevier, vol. 15(4), pages 321-348, December.
    12. Bharat Barot & Zan Yang, 2004. "House Prices and Housing Investment in Sweden and the UK. Econometric analysis for the period 1970-1998," Macroeconomics 0409022, University Library of Munich, Germany.
    13. Giavazzi, Francesco & Pagano, Marco, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," CEPR Discussion Papers 1284, C.E.P.R. Discussion Papers.
    14. Øyvind Eitrheim & Eilev S. Jansen & Ragnar Nymoen, 2002. "Progress from forecast failure -- the Norwegian consumption function," Econometrics Journal, Royal Economic Society, vol. 5(1), pages 40-64, June.
    15. Johnsson, Helena & Kaplan, Peter, 1999. "An Econometric Study of Private Consumption Expenditure in Sweden," Working Papers 70, National Institute of Economic Research.
    16. Barot, Bharat & Yang, Zan, 2002. "House Prices and Housing Investment in Sweden and the United Kingdom: Econometric Analysis for the Period 1970-1998," Working Papers 80, National Institute of Economic Research.
    17. Hansen, Hermann-Josef, 1996. "Der Einfluß der Zinsen auf den privaten Verbrauch in Deutschland," Discussion Paper Series 1: Economic Studies 1996,03, Deutsche Bundesbank.
    18. Hansen, Hermann-Josef, 1996. "The impact of interest rates on private consumption in Germany," Discussion Paper Series 1: Economic Studies 1996,03e, Deutsche Bundesbank.
    19. Berg, Lennart, 1996. "Age Distribution, Saving and Consumption in Sweden," Working Paper Series 1996:22, Uppsala University, Department of Economics.
    20. Adams, Zeno & Füss, Roland, 2010. "Macroeconomic determinants of international housing markets," Journal of Housing Economics, Elsevier, vol. 19(1), pages 38-50, March.

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