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Resurrecting the Wealth Effect on Consumption: Further Analysis and Extension

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Author Info
Nicholas Apergis (University of Macedonia)
Stephen M. Miller (University of Connecticut and University of Nevada, Las Vegas)

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Abstract

This paper investigates whether various components of wealth affect real consumption asymmetrically through a threshold adjustment model. The empirical findings for the U.S. show that only stock market assets, financial assets including stock market assets, and household net assets exert a practical wealth effect on consumption expenditure. By contrast, financial assets excluding stock market assets, tangible assets, total assets, and the Lettau-Ludvigson measure of net assets do not exert a practical wealth effect on consumption expenditure. In addition, the empirical findings favor the presence of an asymmetric effect on real consumption for the former cases, with negative 'news' affecting consumption less than positive 'news'.

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Publisher Info
Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-57.

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Length: 32 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:uct:uconnp:2005-57

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Related research
Keywords: Consumption; Stock market; Wealth effect; Asymmetry;

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Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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