Article ID: | iaor20132653 |
Volume: | 21 |
Issue: | 1 |
Start Page Number: | 3 |
End Page Number: | 11 |
Publication Date: | Jun 2013 |
Journal: | Central European Journal of Operations Research |
Authors: | Dumicic Ksenija, Casni Anita, Palic Irena |
Keywords: | Croatia, consumer behaviour |
In this paper cointegration and error correction models are used to explore the long run and short run behavior of personal consumption in Croatia as a function of income, house prices and total credit to households. The results of the analysis showed that income (approximated by net real wage), house price and total credits to households play an important role in determining personal consumption. Also, lagged values of house prices showed significant impact on consumption, suggesting house price persistence. The most likely factors driving the house price persistence may include expectations and idiosyncratic institutional characteristics like illiquid real estate markets, inadequate property rights protection, high transaction costs, and underdeveloped financial instruments.