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Stock Market Wealth and Consumption

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  • James M. Poterba

Abstract

This paper explores the link between changes in the aggregate value of corporate stock and changes in consumer spending. It presents data on the distribution of corporate stock ownership based on the 1998 Survey of Consumer Finances. It also uses time-series evidence on the comovement of stock market wealth and various categories of consumer spending to calibrate "the wealth effect." It concludes that in the year after a change in stock market values, consumer spending is likely to rise by between one and two cents for each dollar increase in the value of corporate stock.

Suggested Citation

  • James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
  • Handle: RePEc:aea:jecper:v:14:y:2000:i:2:p:99-118
    Note: DOI: 10.1257/jep.14.2.99
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    References listed on IDEAS

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    More about this item

    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
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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