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Wealth Effects and the New Economy

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  • Torsten Sløk
  • Hali J. Edison

Abstract

This paper investigates if there is a different impact from changes in "new" and "old" economy stock valuations on private consumption. Estimating a reduced-form VAR for seven OECD countries for the 1990s, it is found that the impact from changes in old economy stock valuations on consumption is in general larger in the United States, Canada, and United Kingdom than in continental Europe. Furthermore, the impact from changes in new economy valuations to consumption is roughly the same in the United States, Canada, and United Kingdom and in continental Europe. Finally, the results suggest that in continental Europe the impact on consumption from changes in the valuation of new economy stocks is bigger than from the old economy stocks, whereas for the United States, Canada, and United Kingdom the impact is more or less the same between the two sectors.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/77.

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Length: 22
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/77

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References

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  1. Gourinchas, Pierre-Olivier & Parker, Jonathan A, 2000. "Consumption Over the Life-Cycle," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2345, C.E.P.R. Discussion Papers.
  2. Laurence Boone & Claude Giorno & Pete Richardson, 1998. "Stock Market Fluctuations and Consumption Behaviour: Some Recent Evidence," OECD Economics Department Working Papers 208, OECD Publishing.
  3. Martha Starr-McCluer, 1998. "Stock market wealth and consumer spending," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-20, Board of Governors of the Federal Reserve System (U.S.).
  4. Campbell, John, 2000. "Asset Pricing at the Millennium," Scholarly Articles 3294737, Harvard University Department of Economics.
  5. Campbell, John Y., 1999. "Asset prices, consumption, and the business cycle," Handbook of Macroeconomics, Elsevier, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 19, pages 1231-1303 Elsevier.
  6. Bayoumi, Tamim, 2001. "The morning after: explaining the slowdown in Japanese growth in the 1990s," Journal of International Economics, Elsevier, Elsevier, vol. 53(2), pages 241-259, April.
  7. James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 14(2), pages 99-118, Spring.
  8. Morris A. Davis & Michael G. Palumbo, 2001. "A primer on the economics and time series econometrics of wealth effects," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2001-09, Board of Governors of the Federal Reserve System (U.S.).
  9. Torsten Sløk & Hali J. Edison, 2001. "New Economy Stock Valuations and Investmen in the 1990's," IMF Working Papers, International Monetary Fund 01/78, International Monetary Fund.
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Citations

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Cited by:
  1. Chen, Jie, 2006. "Re-evaluating the association between housing wealth and aggregate consumption: New evidence from Sweden," Journal of Housing Economics, Elsevier, Elsevier, vol. 15(4), pages 321-348, December.
  2. Sheng Guo & Umut Unal, 2011. "VAR Estimates of the Housing and Stock Wealth Effects: Cross-country Evidence," Working Papers, Florida International University, Department of Economics 1103, Florida International University, Department of Economics.
  3. Sousa, Ricardo M., 2009. "Wealth effects on consumption: evidence from the euro area," Working Paper Series, European Central Bank 1050, European Central Bank.
  4. Salotti, Simone, 2010. "Wealth effect in the US: evidence from the combination of two surveys," MPRA Paper 27352, University Library of Munich, Germany.
  5. Bostic, Raphael & Gabriel, Stuart & Painter, Gary, 2009. "Housing wealth, financial wealth, and consumption: New evidence from micro data," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(1), pages 79-89, January.
  6. Carol C. Bertaut, 2002. "Equity prices, household wealth, and consumption growth in foreign industrial countries: wealth effects in the 1990s," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 724, Board of Governors of the Federal Reserve System (U.S.).
  7. Hali Edison & Torsten Sl�k, 2003. "The impact from changes in stock market valuations on investment: new economy versus old economy," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(9), pages 1015-1023.
  8. Alexander Ludwig & Torsten Sløk, 2002. "The Impact of Changes in Stock Prices and House Priceson Consumption in OECD Countries," IMF Working Papers, International Monetary Fund 02/1, International Monetary Fund.
  9. Eckhard Hein, 2009. "A (Post-) Keynesian perspective on "financialisation"," IMK Studies 01-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  10. R.J.M. Alessie & P.J.A. van Els & L.H. Hoogduin, 2002. "The Role of Wealth in the Economy: the 2002 Annual Meeting Papers of the Royal Netherlands Economic Association," WO Research Memoranda (discontinued), Netherlands Central Bank, Research Department 709, Netherlands Central Bank, Research Department.
  11. Illing, Gerhard & Klüh, Ulrich, 2004. "Vermögenspreise und Konsum," Discussion Papers in Economics, University of Munich, Department of Economics 316, University of Munich, Department of Economics.
  12. Edda Claus & Mardi Dungey & Renee Fry, 2006. "Monetary Policy In Illiquid Markets: Options For A Small Open Economy," CAMA Working Papers 2006-17, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  13. Laurent Clerk & Christian Pfister, 2003. "The role of financial factors in the transmission of monetary policy," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 192-212 Bank for International Settlements.
  14. Dungey, Mardi & Fry, Renee & Martin, Vance L., 2004. "Identification of common and idiosyncratic shocks in real equity prices: Australia, 1982-2002," Global Finance Journal, Elsevier, vol. 15(1), pages 81-102.
  15. Guy Meredith, 2001. "Why Has the Euro Been so Weak?," IMF Working Papers, International Monetary Fund 01/155, International Monetary Fund.
  16. Torsten Sløk & Hali J. Edison, 2001. "New Economy Stock Valuations and Investmen in the 1990's," IMF Working Papers, International Monetary Fund 01/78, International Monetary Fund.
  17. Hsiao, Frank S. T. & Hsiao, Mei-chu W. & Yamashita, Akio, 2003. "The impact of the US economy on the Asia-Pacific region: does it matter?," Journal of Asian Economics, Elsevier, Elsevier, vol. 14(2), pages 219-241, April.
  18. I. Arnold & P.J.A. van Els & J. de Haan, 2002. "Wealth Effects and Monetary Policy," WO Research Memoranda (discontinued), Netherlands Central Bank, Research Department 719, Netherlands Central Bank, Research Department.

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