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Is there a housing wealth effect in European countries?

Abstract

In this study, a housing wealth effect on personal consumption is assumed and tested on 16 selected European countries using an estimator developed for dynamic heterogeneous panel data analysis. Empirical estimates have shown that there is a long-run and a short-run housing wealth effect in analysed countries. The elasticity of real private consumption to changes in real disposable income has shown to be positive and statistically significant as well as the elasticity of consumption to changes in real housing wealth. Therefore, the research hypothesis of this paper of a statistically significant and positive long-term relationship between housing wealth and private consumption in the analysed countries was confirmed.

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Fiscal Policy, FDI and Macroeconomic Stabilization

Abstract

The purpose of this paper is to investigate the impact of counter-cyclical fiscal policies and FDI inflows on macroeconomic stabilization in the selected Euro area countries. Performing a panel data analysis for 9 economies over the timespan 1980-2014 and, using a Pooled Mean Group estimator, it was shown that a counter-cyclical fiscal policy, associated with a lower tax burden during turbulent economic times, contributes to the reduction of output volatility. At the same time, increased FDI inflows positively influence the macroeconomic stabilization. In addition, a reduced volatility of investment inflows has a positive impact on the economic growth stabilization, but this result is sensitive to the way the tax burden is calculated. In a nutshell, the findings show that, in the long-run, authorities should resort to counter-cyclical fiscal policies and encourage FDI inflows to stabilize the economy and, thus, reduce the amplitude of business cycles.

Open access