Consumption and housing wealth breakdown of the effect of a rise in interest rates
In this article the effect on consumption of a fall in housing wealth and housing prices, resulting from an increase in interest rates is estimated. 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. Estimation of the theoretical model is done by means of a Vectorial Error-Correction (VEC) model.
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Document Type: Research Article
Publication date: 01 June 2012