Macroeconomics, 2nd Edition by Pearson

CONSUMPTION

81

Housing is a dominant component of wealth

for many households with more households

owning homes than stocks. In many econo-

mies, house price rises have been accompa-

nied by a consumption boom. For example,

Barata and Pacheco

*

state, “the housing

market appears to be more important than

the stock market as a factor influencing con-

sumption” and find that a 1 per cent increase

in housing wealth leads to a 0.1–0.2 per cent

increase in consumption for various European

countries. In Taiwan, the savings rate reached

a peak of 38.5 per cent of GDP in 1987 and,

subsequently, dropped to a low of 24 per cent

by 2001. ...