Wealth Effects in the CEE Emerging Economies: A Long-Run Panel Approach

Abstract This paper explores the relationship between actual individual consumption, housing wealth, and stock wealth in a panel of emerging European Union economies. Using the pooled mean group estimator (PMG) and a crisis dummy variable, the analysis captures the effects of the 2008–2010 financial crisis. Results indicate that both housing and stock wealth positively influence consumption, with housing wealth having a slightly stronger impact. Consumption is also sensitive to long-term changes in the income from wages and salaries. Particularly during the crisis, when real estate market downturns significantly affected households in Central and Eastern Europe (CEE), the effect of changes in asset prices raised in magnitude. The findings offer important policy implications for managing asset price effects on household consumption, particularly in emerging markets.