Consumption, Wealth and Business Cycles in Germany

46 Pages Posted: 19 Apr 2005

See all articles by Britta Hamburg

Britta Hamburg

Deutsche Bundesbank - Economic Research Centre

Mathias Hoffmann

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Joachim Keller

Deutsche Bundesbank - Economic Research Centre

Date Written: April 2005

Abstract

This paper studies the long-run relationship between consumption, asset wealth and income in Germany, based on data from 1980 to 2003. While earlier studies - mostly for the Anglo-Saxon economies - have generally documented that departures of these three variables from their common trend signal changes in asset prices, we find that for Germany they predict changes in income. Asset price changes are found to have virtually no effect on consumption - both in the short as well as in the long-run. We offer an explanation of this finding that emphasizes differences between the bank-based German financial system and the rather market-based Anglo-American system: stock ownership by private households is much less widespread in Germany than in the Anglo-Saxon economies and the share of publicly traded equity in household wealth is much smaller in Germany than in the U.S., the UK or Australia.

Keywords: wealth effect on consumption, business cycles, monetary policy transmission, financial systems, asset price predictability, permanent income hypothesis

JEL Classification: E21, E32, E44, G12, G20

Suggested Citation

Hamburg, Britta and Hoffmann, Mathias and Keller, Joachim, Consumption, Wealth and Business Cycles in Germany (April 2005). Available at SSRN: https://ssrn.com/abstract=706801

Britta Hamburg

Deutsche Bundesbank - Economic Research Centre ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

Mathias Hoffmann (Contact Author)

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Joachim Keller

Deutsche Bundesbank - Economic Research Centre ( email )

Wilhelm-Epstein-Strasse 14
Frankfurt/Main D-60431
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
128
Abstract Views
2,495
rank
249,461
PlumX Metrics