Housing equity withdrawal and the average propensity to consume

Abstract

This study explains the behaviour of the average propensity to consume for durable and non-durable expenditure in the UK during 1980–91. Explicit attention is paid to the role of housing wealth and in particular, equity withdrawal which has become more prominent as a result of financial deregulation. Long-run relationships are estimated using the Johansen procedure and from this reasonable short-run equations are obtained. The results indicate positive impact from housing equity withdrawal on the average propensity to consume.