Multi-horizon wealth effects across the G7 economies

Abstract

This paper investigates the nature of the intertemporal relationship between household wealth and private consumption across the G7 countries. We make use of the multistep non-causality test, recommended by Dufour et al. (2006) and the causality measures, recommended by Dufour and Taamouti (2010), to disentangle the dynamic relationship between stock market wealth, housing wealth, income and household consumption over different prediction horizons. Our results document the absence of short-horizon causality among the variables under study and the presence of long-horizon causality across variables.