Consumption asymmetry and the stock market: New evidence through a threshold adjustment model
AbstractThis paper investigates whether stock market wealth affects real consumption asymmetrically through a threshold adjustment model. The empirical findings for the US show that wealth produces an asymmetric effect on real consumption, with negative 'news' affecting consumption less than positive 'news.' Thus, policy makers may want to focus more attention on preventing asset 'bubbles' than on responding to negative asset shocks.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-08.
Length: 19 pages
Date of creation: Mar 2005
Date of revision:
Note: The authors express special thanks to Angelos Antzoulatos and Plutarchos Sakellaris for their comments on an earlier draft of this paper and to Giannis Litsios, a charismatic doctorate candidate, for his valuable assistance with the software used in this work. Needless to say, the usual disclaimer applies.
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Consumption; Stock market; Wealth effect; Asymmetry;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-03 (All new papers)
- NEP-FIN-2005-04-03 (Finance)
- NEP-FMK-2005-04-03 (Financial Markets)
- NEP-MAC-2005-04-03 (Macroeconomics)
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