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Stock Market Wealth Effects and the New Economy: A Cross-Country Study

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  • Edison, Hali
  • Slok, Torsten

Abstract

This paper investigates the impact from changes in "new" and "old" economy stock valuations on private consumption. The results from estimating a reduced form VAR for seven OECD countries for the 1990s suggest that the impact from changes in old economy stock valuations on consumption is, in general, larger in countries with market-based financial systems (USA, Canada and the UK) than in countries with bank-based financial systems (continental Europe). Furthermore, the results indicate that the impact from changes in new economy valuations to consumption is roughly the same in the USA, Canada, the UK and in continental Europe. In addition, the results suggest that, in continental Europe, the impact on consumption from changes in the valuation of new economy stocks is bigger than from the old economy stocks, whereas for the Anglo-Saxon countries, the impact is more or less the same between the two sectors. Copyright 2002 by Blackwell Publishers Ltd.

Suggested Citation

  • Edison, Hali & Slok, Torsten, 2002. "Stock Market Wealth Effects and the New Economy: A Cross-Country Study," International Finance, Wiley Blackwell, vol. 5(1), pages 1-22, Spring.
  • Handle: RePEc:bla:intfin:v:5:y:2002:i:1:p:1-22
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    Cited by:

    1. Rocha Armada, Manuel J. & Sousa, Ricardo M. & Wohar, Mark E., 2015. "Consumption growth, preference for smoothing, changes in expectations and risk premium," The Quarterly Review of Economics and Finance, Elsevier, vol. 56(C), pages 80-97.
    2. Nicholas Apergis & Stephen M. Miller, 2005. "Consumption asymmetry and the stock market: New evidence through a threshold adjustment model," Working papers 2005-08, University of Connecticut, Department of Economics.
    3. Salotti, Simone, 2009. "Wealth effect in the US: evidence from brand new micro-data," MPRA Paper 17732, University Library of Munich, Germany.
    4. Simone Salotti, 2012. "Wealth Effects in the US: Evidence from the Combination of Two Surveys," The Economic and Social Review, Economic and Social Studies, vol. 43(1), pages 67-98.
    5. Tamim Bayoumi & Hali Edison, 2003. "Is Wealth Increasingly Driving Consuption?," DNB Staff Reports (discontinued) 101, Netherlands Central Bank.
    6. Nicolaas Groenewold, 2003. "Consumption and Stock Prices: Can We Distinguish Signalling from Wealth Effects?," Economics Discussion / Working Papers 03-22, The University of Western Australia, Department of Economics.
    7. Salotti, Simone, 2010. "An appraisal of the wealth effect in the US: evidence from pseudo-panel data," MPRA Paper 27351, University Library of Munich, Germany, revised Dec 2010.
    8. Bruno Eugène & Philippe Jeanfils & Benoît Robert, 2003. "La consommation privée en Belgique," Working Paper Document 39, National Bank of Belgium.
    9. Nicholas Apergis & Stephen M. Miller, 2004. "Consumption Asymmetry and the Stock Market: Further Evidence," Working papers 2004-19, University of Connecticut, Department of Economics.
    10. Salotti, Simone, 2008. "Global imbalances and household savings: the role of wealth," MPRA Paper 17729, University Library of Munich, Germany, revised 2009.

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