Financial effects in historic consumption and investment functions

Research output: Contribution to journalArticle


The global financial crisis has highlighted the importance of financial factors on economic performance. Most of the existing research analyses the contemporary experience, and especially the 1980 s onwards. This paper investigates the effects of stock prices, real estate prices and debt on consumption and investment expenditures by estimating consumption and investment equations for about 110 years of data for Britain, France, Norway and Sweden. We find positive debt effects on consumption in three of four countries, but no consistent effects of stock prices and house prices. Effects on consumption are stronger in the more market-based economy of Britain than in the more state-oriented economies of France, Norway and Sweden: in Britain but not in the other countries, consumption has increased in response to stock and house prices. We find positive effects of stock prices on investment in all four countries. Credit expansion boosts investment in some of the countries while house prices seem to have become more influential for investment after 1980. The results indicate that there is interesting variation in financial effects over time, and point forward for possible research on the interaction between financial variables and the real economy since the early twentieth century.


External organisations
  • University of Gothenburg
  • King's College London
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economic History
  • Economics
Original languageEnglish
JournalInternational Review of Applied Economics
Publication statusE-pub ahead of print - 2020 Mar
Publication categoryResearch