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Stock Market Developments and Private Consumer Spending in Emerging Markets

  • Norbert Funke
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    Using a panel of 16 emerging markets, the paper finds a small but statistically significant effect of stock market developments on private consumption spending. In the short run, a 10 percent decline in the annual real stock market return is associated with a reduction in real private consumption by around 0.1-0.3 percent on average. There is evidence that the link between stock market fluctuations and private consumption has become stronger during the 1990s as stock markets in emerging economies have broadened and deepened. However, there is no significant evidence that the influence is asymmetric. Stock price declines do not have a different impact on consumption than stock price increases.

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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16219
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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/238.

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    Length: 23
    Date of creation: 01 Dec 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/238
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    1. Kim, E Han & Singal, Vijay, 2000. "Stock Market Openings: Experience of Emerging Economies," The Journal of Business, University of Chicago Press, vol. 73(1), pages 25-66, January.
    2. Karl E. Case, John M. Quigley, Robert J. Shiller., 2001. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Economics Working Papers E01-308, University of California at Berkeley.
    3. Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," William Davidson Institute Working Papers Series 79, William Davidson Institute at the University of Michigan.
    4. Paolo Mauro, 2000. "Stock Returns and Output Growth in Emerging and Advanced Economies," IMF Working Papers 00/89, International Monetary Fund.
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    6. Torsten M Sloek & Peter F. Christoffersen, 2000. "Do Asset Prices in Transition Countries Contain Information About Future Economic Activity?," IMF Working Papers 00/103, International Monetary Fund.
    7. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2000. "Emerging Equity Markets and Economic Development," NBER Working Papers 7763, National Bureau of Economic Research, Inc.
    8. Utpal Bhattacharya & Hazem Daouk, 2002. "The World Price of Insider Trading," Journal of Finance, American Finance Association, vol. 57(1), pages 75-108, 02.
    9. Anusha Chari & Peter Blair Henry, 2002. "Capital Account Liberalization: Allocative Efficiency or Animal Spirits?," NBER Working Papers 8908, National Bureau of Economic Research, Inc.
    10. Martha Starr-McCluer, 2002. "Stock Market Wealth and Consumer Spending," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 69-79, January.
    11. Norbert Funke & Nicola Fuchs-Schündeln, 2001. "Stock Market Liberalizations; Financial and Macroeconomic Implications," IMF Working Papers 01/193, International Monetary Fund.
    12. Christopher D. Carroll, 2001. "A Theory of the Consumption Function, With and Without Liquidity Constraints (Expanded Version)," NBER Working Papers 8387, National Bureau of Economic Research, Inc.
    13. Sydney Ludvigson & Charles Steindel, 1998. "How important is the stock market effect on consumption?," Research Paper 9821, Federal Reserve Bank of New York.
    14. James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
    15. William G. Gale & John Sabelhaus, 1999. "Perspectives on the Household Saving Rate," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 181-224.
    16. Laurence Boone & Claude Giorno & Pete Richardson, 1998. "Stock Market Fluctuations and Consumption Behaviour: Some Recent Evidence," OECD Economics Department Working Papers 208, OECD Publishing.
    17. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
    18. Morris A. Davis & Michael G. Palumbo, 2001. "A primer on the economics and time series econometrics of wealth effects," Finance and Economics Discussion Series 2001-09, Board of Governors of the Federal Reserve System (U.S.).
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