Financial and housing wealth effects on private consumption: the case of Greece

This paper investigates the effects of household wealth on consumption expenditure in Greece. Recognising the distinct and leading role of housing in the wealth portfolios of Greek households, we disentangle financial wealth effects from housing wealth effects, to assess the impact of these two wealth components separately. This type of analysis is being conducted for the first time for the case of Greece, and employs quarterly data for the time period 2000-2015, including a novel series on housing wealth constructed for the purpose of the paper. The results of the analysis point to the existence of a statistically significant cointegrating relationship between consumption and wealth, with positive financial and housing wealth effects in the long run. In the short run, both wealth components appear to play a role in determining consumption, with the effects of housing wealth being more pronounced.