Title: Consumption, income, wealth and 10-year treasury rate in the 51 States of US: A panel cointegration approach
Authors: Dimitra Kontana - University of Macedonia (Greece) [presenting]
Stylianos Fountas - University of Macedonia (Greece)
Abstract: The long-run relationship between consumption, financial and housing wealth is investigated by considering the 10-year treasury rate for the 51 States of US. By using quarterly observed up-date data from 1975 (1) to 2018 (1) we conduct two kinds of tests in order to perform the panel cointegration analysis: a residual based cointegration test for cross-sectionally independent panel and a panel cointegration test for cross-sectional dependence panel. All the test statistics reject the null of no cointegration hypothesis at 1 percent level of significance. The empirical findings show that housing wealth elasticity of consumption ranges from 0.072 to 0.115 percent, while the financial wealth elasticity of consumption is between 0.044 to 0.080 percent. The latter is less significant than the income and housing wealth according to the first statistic, and insignificant according to the second statistic. These results are in line with the findings of early researchers, who performed alternative to cointegration methods. Finally, Granger causality tests show that there is a bidirectional short-term causality between per capita consumption, income and financial wealth in the short run and between all the variables in the long run.