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• Claude Giorno
• Pete Richardson

This paper examines the likely influence of recent stock market fluctuations on major OECD economies, focusing on wealth effects and consumption. After reviewing the relevant theoretical framework and available empirical evidence, consumption functions are estimated for the US including the influence of financial wealth. The resulting estimates of the marginal propensity to consume out of financial wealth are extrapolated to other G7 countries, allowing for differences in stock market capitalisation, and compared with ones obtained more directly from consumption functions that include stock market prices as an explanatory variable. Simulations are then carried out to assess the potential world impact of a major fall in stock market prices in the G7 countries using a version of the OECD INTERLINK model which embodies the latter equations. The overall effects are found to be significant, particularly when relevant international linkage mechanisms are taken into account ...

Ce papier analyse les effets richesses potentiels générés par les fluctuations récentes des marché d’actifs financiers des principals économies de l’OCDE. Après une présentation rapide des fondements théoriques et des résultats empiriques récents, des fonctions de consommation incluant une variable de richesse financière sont estimées pour les Etats-Unis, permettant de calculer des propensions marginales à consommer les gains de richesse financière. Celles-ci sont alors extrapolées pour les autres pays du G7, en tenant compte des différences de ratio de capitalisation boursière. Elles sont ensuite comparées à des propensions estimées à partir de fonctions de consommation incluant le prix des actifs boursiers. Ces dernières sont intégrées au modèle INTERLINK de l’OCDE, ce qui permet de simuler l’impact potentiel sur l’activité réel d’un crash financier dans les pays du G7. Les effets sur l’économie globale sont significatifs, particulièrement lorsque sont pris en compte les ...

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Paper provided by OECD, Economics Department in its series OECD Economics Department Working Papers with number 208.

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Date of creation: 02 Dec 1998
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Handle: RePEc:oec:ecoaaa:208-en

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