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Stock Market Developments and Private Consumer Spending in Emerging Markets

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  • Norbert Funke
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    Abstract

    Using a panel of 16 emerging markets, the paper finds a small but statistically significant effect of stock market developments on private consumption spending. In the short run, a 10 percent decline in the annual real stock market return is associated with a reduction in real private consumption by around 0.1-0.3 percent on average. There is evidence that the link between stock market fluctuations and private consumption has become stronger during the 1990s as stock markets in emerging economies have broadened and deepened. However, there is no significant evidence that the influence is asymmetric. Stock price declines do not have a different impact on consumption than stock price increases.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/238.

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    Length: 23
    Date of creation: 01 Dec 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/238

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    Related research

    Keywords: Emerging markets; Bonds; Stock markets; stock market; equity returns; stock market developments; stock market liberalization; stock price; equity prices; stock prices; stock market liberalizations; stock market fluctuations; capital gains; stock returns; stock market declines; financial liberalization; stock market prices; capital markets; stock ownership; stock options; capital account liberalization; equity markets; cost of capital; stock exchange; stock exchanges; stockholders; risk-free interest rate; financial assets; stock market decline; world capital markets; stock market investments; international financial statistics; insider trading; risk aversion; credit rating; capital gains tax; international finance; financial economics; stock valuations; emerging stock markets; stock market openings; consumer price index; capital gain; financial markets;

    References

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    3. Kim, E Han & Singal, Vijay, 2000. "Stock Market Openings: Experience of Emerging Economies," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 73(1), pages 25-66, January.
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    11. 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.).
    12. Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," NBER Working Papers 6312, National Bureau of Economic Research, Inc.
    13. 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.
    14. Paolo Mauro, 2000. "Stock Returns and Output Growth in Emerging and Advanced Economies," IMF Working Papers 00/89, International Monetary Fund.
    15. Torsten Sløk & Peter F. Christoffersen, 2000. "Do Asset Prices in Transition Countries Contain Information About Future Economic Activity?," IMF Working Papers 00/103, International Monetary Fund.
    16. Barry Bosworth, 1975. "The Stock Market and the Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 527-300.
    17. Norbert Funke & Nicola Fuchs-Schündeln, 2001. "Stock Market Liberalizations," IMF Working Papers 01/193, International Monetary Fund.
    18. Laurence Boone & Claude Giorno & Pete Richardson, 1998. "Stock Market Fluctuations and Consumption Behaviour: Some Recent Evidence," OECD Economics Department Working Papers 208, OECD Publishing.
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