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BOK Working Paper No.2019-21, Wealth Effects Revisited: Quantile Canonical Cointegrating Regression Approach

Economic Research Institute (82-2-759-5366) 2019.08.07 1821

Title : Wealth Effects Revisited: Quantile Canonical Cointegrating Regression Approach
Author : Ki-Ho Kim(BOK)

<Abstract>

  This paper analyzes the effects of wealth and household debt on household consumption expenditure using macro time series data by quantile regression. For this purpose, we propose the QCCRE(Quantile Canonical Cointegrating Regression Estimator). The QCCRE provides an estimation method for quantile regression with non-stationary time series data. The estimator is a solution to the Koenker and Bassetts (1978)’s minimization problem, and its asymptotic distribution follows a mixed normal distribution.
  The estimation results show that disposible income has a positive effect which confirms previous research. Financial assets (stock price index) have a positive wealth effect, however, household’s real assets (house price index) have a negative wealth effect which is different from previous research. Household debt has a positive effect on household consumption. However, the net effects of household debt may be smaller or even insignificant because household debt is sum of martgage loan and non-martgage loans that have opposite effects on household consumption.

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