Índices de rotación del activo total

The basic ideas and key theoretical links between wealth and consumption can be analysed in the framework of the permanent income hypothesis (Friedman, 1957) or the life-cycle model of household spending behaviour (Ando and Modigliani, 1963). In this framework, the level of consumption depends on households’ current and expected future income stream as well as their stock of wealth. In detail, a typical consumer will accumulate and deplete his/her wealth to keep his/her spending more or less steady. In terms of predictable changes in wealth, the model shows that wealth could vary substantially over the consumer’s lifetime but his/her consumption will stay relatively constant. In the case of unexpected changes in wealth, the household will spread out the benefit or deficit from the unexpected gain or loss in wealth by raising or cutting current consumption by a fraction of the value of the change in wealth and keep the new level of consumption stable over time. Therefore, the framework suggests that predictable changes in wealth should not cause changes in planned consumer expenditure, but unexpected changes might influence the plan.

Researchers have extended the basic model in order to capture a more realistic interpretation of the process by which consumers make their spending decisions. For instance, they have restricted the ability of households to borrow as much as they would like against higher future incomes. They also allowed the possibility that households may save some money as a precaution against future unpredictable events or leave the money to other individuals, charities, or the

22

government after death. All these extensions have helped to explain some deviations from the underlying life-cycle theory. Specifically, it is then possible to measure the response of consumption even in terms of predictable changes in wealth or income, and also determine the variables that could predict future changes in wealth or income.

However, consumption does not behave the same way for all types of wealth. Catte et al. (2004) have argued that the MPC out of financial and housing wealth could differ due to a number of factors, which can work in opposite directions. Firstly, unlike financial assets, housing is both an asset and a consumption item. The effect of higher house prices on wealth is partly or fully offset by the higher cost of present and future housing services consumed. As an example, following a house price increase, homeowners may feel wealthier through both a realized wealth effect (home equity withdrawal or selling the house) and an unrealized wealth effect (higher discounted value of wealth). However, the increase in house prices also implies a rise in the value of housing services, which works in the opposite direction with respect to both realized and unrealized wealth effects. For instance, for homeowners who intend to increase their consumption of housing services (e.g. moving into a more expensive home), or renters who want to rent a house, the net housing wealth effect is negative. It is therefore the different categories of households as well as the relative size of their consumption responses to changes in housing wealth that determine the sign and size of the aggregate housing wealth effect on consumer spending.

Secondly, housing wealth can facilitate access to credit for liquidity-constrained households, which may not have access to uncollateralized consumer credit or

23

may find it prohibitively expensive. Homeowners with lower wealth are more likely to be liquidity-constrained than wealthier homeowners. Therefore, if mortgage markets allow homeowners to borrow easily against home equity, a change in aggregate housing wealth may have a larger effect on consumer spending than an equivalent change in financial wealth.

Thirdly, housing assets are treated as less liquid than financial assets, and some people may develop “mental accounts” that view changes in the value of financial wealth as more appropriate to use for current consumption and changes in housing wealth as long-term savings. Therefore, households are more reluctant to sell their house and are thus less likely to transform any house price increase into liquid assets ready for consumption. Moreover, it is relatively costly and time- consuming to convert increases in housing wealth into money. For example, transaction costs are much higher on housing assets than on financial assets in many countries. Therefore, consumption is likely to respond to a house price shock only after the accumulated price movement has become so large that it exceeds the costs associated with adjusting the housing stock.

Fourthly, unlike a rise in stock price which can reflect an increase in the economy’s expected productive potentials and future income prospects, higher

house prices may simply mirror scarcity owing to a higher demand, with no change in either the quantity or the quality of the services housing can provide to the overall economy (Ciarlone, 2011). However, even if there is no change in the aggregate wealth, housing price changes still would affect the consumption decisions of different groups of people, such as current homeowners and potential house buyers.

24

Finally, housing prices are less volatile than equity prices in most countries. This has made households regard changes in housing values as being more persistent, and any change in households’ housing wealth will have a relatively large impact on the households’ expected lifetime resources. Therefore, households might be

willing to modify their consumption more rapidly following a change in house prices (Lettau and Ludvigson, 2004).

In summary, whether the financial wealth effect should be larger or lower than the housing wealth effect is ambiguous on theoretical grounds. Therefore, it is crucial to distinguish financial and housing wealth effects on consumption.