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