STRUCTURAL MODELLING OF ASSET PRICES AND CONSUMPTION: THE ROLE OF THE WEALTH EFFECT

This study investigates the existence of the wealth effect by examining the interaction between consumption and asset prices in the Turkish economy. The impact of fundamental economic indicators such as money supply, housing price index, bond interest rate, BIST 100 index, and exchange rate on consumption were analyzed with the Structural Vector Autoregression (SVAR) model. The findings show that increases in money supply, housing prices, and exchange rate positively affect individuals' perception of wealth and increase consumption. An increase in bond interest rates means that bond prices decrease, restricting consumption. Although the effect of the positive shock in BIST100 increases consumption in the short term, it has a decreasing impact in the long term. The study's results reveal the existence of the wealth effect in Türkiye and important clues that policymakers should consider in developing consumption-supporting strategies.