An Empirical Study on the Wealth Effect of Chinese Stock Market and Real Estate Market

摘要

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.