You are in Home > News > Macroeconomic developments > One more reason why consumption decreased in 2009
- Political stability
- Fiscal affairs
- Monetary policy
- Regulated markets
- Privatisation
- Macroeconomic developments
One more reason why consumption decreased in 2009
submited on 30.12.2009 in category Fiscal affairs | Monetary policy | Macroeconomic developments
Contribution to the decreasing consumption is made, however, by another, often overlooked reason – the so called wealth effect – the effect that the change in wealth has on consumption. Whereas financial wealth increased in 2009, although slowly, the value of housing, owned by households, declined substantially, this put pressure toward additional contraction of consumption. Empirical observations globally reveal that the influence of the decreasing housing wealth on consumption is much stronger than the effect from rising financial wealth as a result of the partial stabilization of financial markets in recent months.
In Bulgaria this is even more so the case, considering the lagging development of the local stock exchange compared to the real estate market in general and housing in particular. The prevailing expectations are for housing prices to remain at low levels in the short run, which will continue to depress consumption in 2010 via the wealth effect.
submited on 30.12.2009 in category Fiscal affairs | Monetary policy | Macroeconomic developments
Contribution to the decreasing consumption is made, however, by another, often overlooked reason – the so called wealth effect – the effect that the change in wealth has on consumption. Whereas financial wealth increased in 2009, although slowly, the value of housing, owned by households, declined substantially, this put pressure toward additional contraction of consumption. Empirical observations globally reveal that the influence of the decreasing housing wealth on consumption is much stronger than the effect from rising financial wealth as a result of the partial stabilization of financial markets in recent months.
In Bulgaria this is even more so the case, considering the lagging development of the local stock exchange compared to the real estate market in general and housing in particular. The prevailing expectations are for housing prices to remain at low levels in the short run, which will continue to depress consumption in 2010 via the wealth effect.
What is your opinion about this article?
0 agreed
0 disagreed