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Full-Text Articles in Social and Behavioral Sciences
The Impact Of Housing Prices On Aggregate Consumption: Evidence From An East Asian City-State, Sock-Yong Phang
The Impact Of Housing Prices On Aggregate Consumption: Evidence From An East Asian City-State, Sock-Yong Phang
Research Collection School Of Economics
Using aggregate consumption data for Singapore, this paper rejects the life-cycle/permanent income and myopia hypotheses as explanations for aggregate consumption behavior. We confirm the presence of liquidity constraints from the asymmetric reaction of consumption to income increases vis-a-vis income declines. When we allow for asymmetric response, anticipated house price increases appear to have a dampening effect on aggregate consumption while declines in expected house price growth also had a negative effect on consumption, although the results are statistically insignificant. There is no evidence that the housing price increases have produced either wealth or collateral enhancement effects on consumption.
Less Developed Country Business Cycles, Hing-Man Leung
Less Developed Country Business Cycles, Hing-Man Leung
Research Collection School Of Economics
Less developed countries (LDCs) have experienced considerable business cycles in recent decades. This coincides with significant increases in their external debt to GDP ratios. Recent theoretical credit cycles literature suggests that indebtedness, and the resulting liquidity constraints, could explain LDC business cycles. This paper builds a macroeconomic model to trace the LDC income paths. In this model indebtedness and liquidity constraints reduce aggregate investment. We use the World Data (1995) to calibrate for the convergence parameter. It is found that LDC cycles are convergent and non-oscillatory, and indebtedness delays the return to long-term steady state income.