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Wealth effects in emerging market economies

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Author Info
Tuomas A. Peltonen () (Corresponding author: European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Ricardo M. Sousa () (University of Minho, Department of Economics and Economic Policies Research Unit (NIPE), Campus of Gualtar, 4710-057 - Braga, Portugal.)
Isabel S. Vansteenkiste () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)

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Abstract

We build a panel of 14 emerging economies to estimate the magnitude of housing, stock market, and money wealth effects on consumption. Using modern panel data econometric techniques and quarterly data for the period 1990/1-2008/2, we show that; (i) wealth effects are statistically significant and relatively large in magnitude; (ii) housing wealth effects tend to be smaller for Asian emerging markets while stock market wealth effects are, in general, smaller for Latin American countries; (iii) housing wealth effects have increased for Asian coutries in recent years; and (iv) consumption reacts stronger to negative than to positive shocks in housing and financial wealth. JEL Classification: E21, E44, D12.

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Paper provided by European Central Bank in its series Working Paper Series with number 1000.

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Length: 40 pages
Date of creation: Jan 2009
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Handle: RePEc:ecb:ecbwps:20091000

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Keywords: Wealth effects; consumption; emerging markets.;

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