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Wealth and asset price effects on economic activity

Author

Listed:
  • Willman, Alpo
  • Whelan, Karl
  • Altissimo, Filippo
  • Georgiou, Evaggelia
  • Sastre, Teresa
  • Valderrama, Maria Teresa
  • Sterne, Gabriel
  • Stocker, Marc
  • Weth, Mark

Abstract

Do asset prices affect real activity? This question has taken on a new importance in recent years, as asset values first surged at the end of 1990s and, thereafter, dramatically retreated. This report reviews the available theoretical and empirical evidence regarding asset price and wealth effects in Europe and some other major economies. The main focus of this report is on consumption effects via the wealth channel, reflecting the bulk of literature on the effects of asset prices. However, asset price effects on investment via the Tobin JEL Classification: D1, D3, D9, G11

Suggested Citation

  • Willman, Alpo & Whelan, Karl & Altissimo, Filippo & Georgiou, Evaggelia & Sastre, Teresa & Valderrama, Maria Teresa & Sterne, Gabriel & Stocker, Marc & Weth, Mark, 2005. "Wealth and asset price effects on economic activity," Occasional Paper Series 29, European Central Bank.
  • Handle: RePEc:ecb:ecbops:200529
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    asset price; cost of capital; household wealth; marginal propensity to consume; wealth channel;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D3 - Microeconomics - - Distribution
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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