Housing Wealth, Household Loans and Household Consumption

Abstract

Based on the database provided by the China Health and Retirement Longitudinal Survey(CHARLS), this paper investigates the impact of housing wealth and household loans on household consumption and the mechanism between them. The results show that: (1) After controlling the debt impact path, the increase in housing wealth will promote household consumption;(2) Non-housing loans played a mediating role when the housing wealth had impacts on household consumption. Budget constraint of household relaxed along with the increase of housing wealth, and stimulate the consumption; (3) the increase in housing wealth resulting in an increase in housing loan flows but did not squeeze out household consumption. These conclusions will deepen our understanding on the policy of real estate and economic effects of household loans in long-term way. It has important implications for the formulation of current macroeconomic policies of China.