It's Not All Fiscal: Effects of Income, Fiscal Policy, and Wealth on Private Consumption
31 Pages Posted: 8 Jun 2015
Date Written: May 2015
Abstract
We attempt to disentangle income and wealth effects on consumption by disaggregating both the different types of income and wealth. We estimate a consumption function for a panel of quarterly data for 14 advanced economies spanning 1998 to 2012, using an error correction specification. We find a significant long-term relation between consumption and the different components of income and wealth. While fiscal policy had direct effects on consumption, the analysis suggests that wealth effects were sizeable, and therefore need to be kept in mind when analyzing consumption trends going forward.
Keywords: Private consumption, Income, Fiscal policy, Income distribution, Developed countries, Panel analysis, Econometric models, Time series, Cross country analysis, wealth, housing assets, financial assets, household debt, benefits, taxes
JEL Classification: E21, E62, D12, H31
Suggested Citation: Suggested Citation