Consumption and Housing Wealth Breakdown of the Effect of a Rise in Interest Rates

Manuel Leon Navarro (1) , Rafael Flores de Frutos (2)

1 Administración y Dirección de Empresas
2 Centro Universitario de Estudios Financieros (CUNEF)

In this article the effect on consumption is estimated of a fall in housing wealth and housing prices, resulting from an increase in interest rates. With the help of a dynamic multiequation, macroeconomic model, the consumer response function is broken down into two parts: a direct response, related to a rise in the cost of credit and another indirect one related to the deterioration of the property market. Estimating the theoretical model is done by means of a vectorial error-correction model.

Mots clés: Social Sciences & Humanities

Domaines: Économie et finance quantitative [q-fin]

Manuel Leon Navarro, Rafael Flores de Frutos. Consumption and Housing Wealth Breakdown of the Effect of a Rise in Interest Rates. Applied Economics, 2011, pp.1. ⟨10.1080/00036846.2011.558484⟩. ⟨hal-00687732⟩