Title: Asymmetry in the extracted housing wealth effects on consumption

Authors: Mahamitra Das; Nityananda Sarkar

Addresses: Economic Research Unit, Indian Statistical Institute, 203 B.T. Road, Kolkata-700108, India ' Economic Research Unit, Indian Statistical Institute, 203 B.T. Road, Kolkata-700108, India

Abstract: This paper investigates the nonlinear long run relationship between extracted housing wealth and consumption under the consumption-smoothing and financial motivations of households in the USA. By applying the methodology of two-regime threshold cointegration in vector error correction model developed by Hansen and Seo (2002), the paper finds that the motivation behind withdrawing equity depends on the threshold variable of differential between mortgage and saving returns. The findings clearly establish that there exists a significant asymmetric effect of housing wealth on consumption in the USA.

Keywords: extracted housing wealth; consumption smoothing motivation; financial motivation; threshold cointegration; asymmetry; USA; United States; vector error correction model; VECM; equity withdrawals; mortgage; savings returns.

DOI: 10.1504/IJEBR.2015.070985

International Journal of Economics and Business Research, 2015 Vol.10 No.2, pp.204 - 211

Received: 20 Jan 2015
Accepted: 25 Apr 2015
Published online: 04 Aug 2015 *

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