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Real Estate Versus Financial Wealth in Consumption |
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| Authors: | John D. Benjamin Peter Chinloy G. Donald Jud |
| Affiliation: | (1) Department of Finance and Real Estate, Kogod School of Business, American University, 4400 Massachusetts Avenue NW, Washington D.C, 20016, U.S.A;(2) Department of Finance, School of Business, University of North Carolina–Greensboro, Greensboro, North Carolina, 27412, U.S.A |
| Abstract: | The consumption function for the U.S. economy is estimated with real estate and financial wealth for quarterly data for 1952:1–2001:4. An additional dollar of real estate wealth increases consumption by 8 cents in the current year, as compared with only 2 cents for financial wealth. The results are consistent with theoretical bounds on the marginal propensity to consume from aggregate wealth. The decline in the stock market during 2000–2001 had a limited impact on aggregate demand in part because of an offsetting real estate wealth effect. |
| Keywords: | consumption savings marginal propensity to consume financial assets real estate assets |
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