Erik Bengtsson

Stf prefekt Ekonomisk-historiska institutionen, Universitetslektor

Financial effects in historic consumption and investment functions

Författare

Engelbert Stockhammer
Erik Bengtsson

Summary, in English

The global financial crisis has highlighted the importance of financial factors on economic performance. Most of the existing research analyses the contemporary experience, and especially the 1980 s onwards. This paper investigates the effects of stock prices, real estate prices and debt on consumption and investment expenditures by estimating consumption and investment equations for about 110 years of data for Britain, France, Norway and Sweden. We find positive debt effects on consumption in three of four countries, but no consistent effects of stock prices and house prices. Effects on consumption are stronger in the more market-based economy of Britain than in the more state-oriented economies of France, Norway and Sweden: in Britain but not in the other countries, consumption has increased in response to stock and house prices. We find positive effects of stock prices on investment in all four countries. Credit expansion boosts investment in some of the countries while house prices seem to have become more influential for investment after 1980. The results indicate that there is interesting variation in financial effects over time, and point forward for possible research on the interaction between financial variables and the real economy since the early twentieth century.

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