An Empirical Study On The Wealth Effect Of Assets Of Resident In China

Consumption demand, especially the weak increase of household expenditure demand has become one of the issues that restrict the rapid development of economy in China. So studying the consumption theory and consumption function form has important practical significance in guiding the establishment of consumption policies. In the process of studying consumption function form, one issue that can not be ignored is the relationship between consumption expenditure and wealth assets, and whether wealth assets have an impact on household consumption expenditure. That is the issue of the existence of wealth effect. Because of the stability of interest, national debt, and company securities, and stock assets and real estate assets are two kinds of main forms of holding assets of resident, so this paper chiefly considers the wealth effect of stock market and real estate market.This paper firstly draws out the wealth effect issue from the consumption function theory, thinking that the wealth effect appears with the development of consumption theory, then reviews relevant research about the wealth effect of stock market and real estate market of the domestic and foreign scholars, and points out some lags in domestic research compared with the same kind of research abroad. Based on the above issues, this paper uses cointegration theory and Vector Error Correction model which are based on VAR model and combines Granger Causality Test to conduct an empirical study on the wealth effect of Chinese stock market and real estate market during the period from the first quarter of 1996 to the second quarter of 2006. The research results show: the wealth effect of Chinese stock market is relatively feeble and marginal propensity of consumption (MPC) is basically around 0.10; compared with stock market, price fluctuation in real estate market has a greater impact on the consumption expenditure of households, and the wealth effect of real estate market is comparably significant. Currently, the main factor influencing the consumption demand in China is still dispensable income, so promoting the increase of income of households and stabilizing income expectation are the fundamental way to promote consumption increase in China.