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The effects of stock market movements on consumption and investment: does the shock matter?

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  • Stephen Millard
  • John Power

Abstract

This paper uses a simple model to examine the links between equity price movements and consumption and investment. Generally, the effect of a given movement in equity prices on consumption depends on the underlying source of the shock to equity prices, and some empirical evidence is presented that supports this. Furthermore, in the model the effect of a given movement in equity prices on investment does not depend on the source of the shock. However, some theoretical arguments and empirical evidence are provided to suggest that it might in the real world.

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File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2004/WP236.pdf
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Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 236.

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Date of creation: Oct 2004
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Handle: RePEc:boe:boeewp:236

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Cited by:
  1. Roy Cromb & Emilio Fernandez-Corugedo, 2004. "Long-term interest rates, wealth and consumption," Bank of England working papers 243, Bank of England.
  2. Goodness C. Aye & Rangan Gupta & Alain Kaninda & Wendy Nyakabawo & Aarifah Razak, 2013. "House Price, Stock Price and Consumption in South Africa: A Structural VAR Approach," Working Papers 201309, University of Pretoria, Department of Economics.

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