The relationship between housing prices and consumption expenditures: The OECD case

Abstract

Along with the 2008 global economic crisis, the impact of housing prices on the economy drew attention. For this reason, many studies have been conducted examining the importance of housing prices from different perspectives. In this study, the effect of housing prices on private final consumption expenditures is analyzed using panel data analysis method utilizing data on private final consumption
expenditure, nominal housing price index and GDP. The data of thirty three OECD countries were analyzed on a quarterly basis, starting from the first quarter of 2008 to the second quarter of 2020. The long-term relationship between variables was examined using the panel cointegration test. The DOLSMG estimator was used to determine the long-term elasticity coefficients.

The main purpose of the study is to determine which macroeconomic indicators affect the relationship between housing prices and consumption expenditures more. For this reason, 33 OECD countries are classified according to various macroeconomic criteria and divided into two. As a result of the tests carried out, if income inequality is high, net savings rates are low and urban population rates bölümlerare at the extreme, the level of impact of housing prices on private consumption increases.

In countries with these characteristics, it would be appropriate to make efforts to prevent sharp fluctuations in house prices with various financial and economic measures. Otherwise, in countries with these characteristics, sudden loss of value in housing prices may cause deeper economic contractions by rapidly decreasing private consumption.