The asymmetric wealth effects of housing market and stock market on consumption in China

摘要

We analyze consumption movements as a function of income and wealth (stocks and housing) with data from China from 1999 to 2010 using a panel vector autoregression model. We find that housing wealth has a negative impact on consumption, but the link is minor, so fluctuation in the housing market should not create sharp movements in consumption. House price control policies implemented in China may encourage limited spending on other goods. Moreover, we find an asymmetric response of consumption to stock market changes. There is a positive response to upward stock wealth change, but no response to downward stock wealth change. Because the results indicate that stock wealth, housing wealth, and consumption Granger cause one another, the Chinese government could influence the stock market and consumption through control of housing prices; the government could also foster the development of the stock market so as to attract investment out of housing, which would help control housing prices. Our results using two different measures of housing wealth and two measures of consumption suggest caution is necessary to avoid inflated wealth effect estimations if inappropriate variables are selected.