The effect of house price changes on cohort consumption in Turkey

Abstract

This paper analyzes the relationship between house prices and household consumption in Turkey. Weutilize twelve consecutive waves of the Turkish Statistical Institute (TURKSTAT) Household Budget Surveys (HBS) from 2003 to 2014. We construct a pseudo-panel data set using birth-year cohorts followingDeaton (1985). WeŞnd that house price changes have a positive and signiŞcant effect on the growth ofcohort consumption. Moreover, the effect of house price changes is stronger for home-owners and itintensiŞes as we move from young cohorts to old cohorts. We observe that there is a marginally signiŞcant and relatively weak relationship between the growth of cohort consumption and house pricechanges for tenants. However, our pooled sample set is restricted to young and middle-aged cohorts fortenants. In addition, weŞnd that the rise of home-ownership ratio increases the growth of cohortconsumption, while the spread of having outstanding housing debt depresses the growth of cohortconsumption. Therefore, our empiricalŞndings are in favor of the wealth channel argument.