The Housing Market, Household Portfolios and the German Consumer

72 Pages Posted: 17 Jun 2016

See all articles by Felix Geiger

Felix Geiger

Deutsche Bundesbank

John Muellbauer

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

Manuel Rupprecht

Deutsche Bundesbank; Münster University of Applied Sciences

Date Written: June 16, 2016

Abstract

House price booms in Anglo-Saxon economies and their collapse were an important part of the financial accelerator via consumption, construction and the banking system. This paper examines links for Germany between household portfolios, income and consumption in a six-equation system, for 1980-2012 data, for consumption, house prices, consumer credit, housing loans, liquid assets and permanent income with latent variables representing the shifts in the availability of the two types of credit.

We find evidence of well specified consumption and house price functions and that Germany differs greatly from the Anglo-Saxon economies: rising house prices do not translate into higher consumer spending. This suggests that the transmission of monetary policy via asset prices, in particular house prices, on consumption is likely to be less effective, and any financial accelerator weaker, in Germany than in the US or the UK. There is little evidence of overvaluation of German house prices by 2012.

Keywords: Consumption, Credit Conditions, Credit Market Liberalization, Household Debt, Housing Collateral, Monetary Transmission

JEL Classification: E21, E27, E44, E51, E58

Suggested Citation

Geiger, Felix and Muellbauer, John and Rupprecht, Manuel and Rupprecht, Manuel, The Housing Market, Household Portfolios and the German Consumer (June 16, 2016). ECB Working Paper No. 1904, Available at SSRN: https://ssrn.com/abstract=2796528 or http://dx.doi.org/10.2139/ssrn.2796528

Felix Geiger (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

John Muellbauer

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom
+44 1865 278 583 (Phone)
+44 1865 278 557 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Manuel Rupprecht

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Münster University of Applied Sciences ( email )

Hüfferstraße 27
Münster, Münster 48149
Germany

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