How Important Are Wealth Effects on China's Consumer Spending?

Type Journal Article - Chinese Economy
Title How Important Are Wealth Effects on China's Consumer Spending?
Author(s)
Volume 43
Issue 2
Publication (Day/Month/Year) 2010
Page numbers 5-22
URL https://www.researchgate.net/profile/Jie_Chen123/publication/227453830_How_Important_Are_Wealth_Effe​cts_on_China's_Consumer_Spending/links/553f1fe50cf294deef71936f.pdf
Abstract
This paper investigates the impact of disposable income and
assets on consumer spending trends in China. By employing the vector
error correction model on the national quarterly data, we demonstrate
that the wealth effects arising from asset value changes are remarkable.
There is only one long-run cointegrating relationship among income,
consumption, and assets. The long-run consumption elasticity of assets
is found to be around 0.51. In addition, evidence shows that assets will
restore the equilibrium relationship in the long run when the system is
disturbed by external shock. Variance decomposition analysis indicates
that assets render a more lasting pronounced impact than income on
consumption variations in China.

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