House prices and household consumption
- Morten Haabeth Grindaker
- Staff Memo
Neither standard economic theory nor empirical studies provide an unequivocal answer to the question of the effect of changes in house prices on household consumption. Estimating this effect empirically is demanding because both house prices and consumption are influenced by a number of common factors that are difficult to measure. Norwegian studies of the relationship between house prices and consumption have until now been based on time series for the country as a whole. In this article, I investigate the relationship between house prices and consumption using empirical analysis based on Norwegian data at the county level. The results suggest that there is a significant positive correlation between developments in house prices and household consumption. The estimated effects are consistent with the results of more recent studies based on national data for Norway, but are slightly weaker than the results of similar research in other countries.
Staff Memos present reports and documentation written by staff members and affiliates of Norges Bank, the central bank of Norway. Views and conclusions expressed in Staff Memos should not be taken to represent the views of Norges Bank.
ISSN 1504-2596 (online)