types of wealth by time series data is multicollinearity. This problem is avoided in our study by relying on the prefectural cross-sectional data. In particular we base our empirical works on the pooled data of the prefectural cross-sections at three different years(1980,85, and 90). The choice of these years simply comes from the availability of financial wealth data reported in National Survey of Family Income and Expenditure (Statistical Bureau of Management and Coordination Agency) which is conducted every five years. By pooling the cross-sectional data over several years it is expected that multicollinearity is mitigated to a large extent and hence we can obtain more stable estimates of wealth effects than by time series data alone.

Thirdly we estimate the effects of wealth on consumption by types of commodities as well as total consumption. Commodities are often categorized by the magnitude of income elasticity. When the income elasticity of a commodity exceeds unity, it is classified as luxury, while it is classified as necessities when it is less than unity. Natural conjecture will be that the effect of wealth on commodity spending also varies according to its characteristics. Casual observations reveal that consumption expenditure by types of commodities exhibits quite a different pattern in the phase of business cycles. Figure 2 shows the annual growth rates of real consumption for four different types of goods: durables, semi-durables, non-durables and services. The growth rate of durables exceeded 10 % in the period of 1986 to 1988, while it plunged into a negative growth (-5.13 %) in 1992. The expenditure for services also attained the high growth rates during 1987-89. It was more than 4 % per annum.

Most volatile component of household expenditure is residential investment. Figure 3 shows the annual growth rates of private residential investment. They exceeded 10% in 1987 and 1988. In fact it amounted to 22.6% in 1987. However, they turned out to be negative in 1991 (-8.2%) and 1992 (-6.7%). This hints that the wealth effect on the demand for residential investment might be different from that on consumption.

Fourthly, based on the estimates of wealth effects, we evaluate how much the wealth variables contributed to a change of consumption in the recent business cycles. As will be shown below, our findings suggest that the role of wealth in consumers' spending is far more important in the contemporary business cycles than in the past business cycles. Furthermore, it will be shown that the magnitude of wealth effects is underestimated substantially under the traditional specification of consumption functions where wealth is proxied by the single variable of total wealth.

The paper is organized as follows. Section 2 discusses the role of wealth in consumers' theories and specifies the consumption functions to be estimated with different types of wealth variables. Section 3 presents the estimation results. Section 4 estimates household expenditure function by types of commodities and compares the magnitude of wealth effects across commodities. Section 5 estimates the residential investment function with wealth variables in the menu of explanatory variables. Based on the estimates obtained in Section 3 and 4, Section 6 evaluates quantitatively the