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Asset Prices and Real Economic Activity

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  • E. Philip Davis

    (National Institute of Economic and Social Research)

Abstract

A survey of the literature on asset price impacts on the real economy shows a much wider range of work on consumption and related wealth effects than on investment. The existence of wealth effects on consumption is little contested, but there remains an issue of whether different effects should hold between countries and across assets. There is less empirical work available on investment, partly reflecting poor results for Tobin?s Q, the user cost of capital and the financial accelerator. Panel investment functions for up to 23 OECD countries are estimated. Significant asset price effects from the financial accelerator and Tobin?s Q are found especially for the G7 countries as well as uncertainty effects as proxied by asset price volatility, but they only matter for the smaller OECD countries. Les prix des actifs et l'économie réelle Un examen des etudes consacrees a l.impact des prix des actifs sur l.economie reelle montre que beaucoup plus de travaux portent sur la consommation et les effets connexes de patrimoine que sur l.investissement. L.existence d.effets de patrimoine sur la consommation n.est guere contestee, mais il reste a savoir si les differents effets sont valables d.un pays et d.un actif a l.autre. Les travaux empiriques sur l.investissement sont moins nombreux, en partie parce que les resultats sont mediocres pour le Q de Tobin, le cout d.usage du capital et l.accelerateur financier. On a estime des fonctions d.investissement sur donnees de panel pouvant couvrir jusqu'a 23 pays de l'OCDE. On constate des effets sensibles de prix des actifs dus a l.accelerateur financier et au Q de Tobin en particulier pour les pays du G7, et egalement des effets d.incertitude etablis a travers la volatilite des prix des actifs, mais ces derniers effets ne sont importants que pour les petits pays de la zone de l'OCDE.

Suggested Citation

  • E. Philip Davis, 2010. "Asset Prices and Real Economic Activity," OECD Economics Department Working Papers 764, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:764-en
    DOI: 10.1787/5kmft7p4dv34-en
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    Citations

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    Cited by:

    1. Douglas Sutherland & Peter Hoeller & Balázs Égert & Oliver Röhn, 2010. "Counter-cyclical Economic Policy," OECD Economics Department Working Papers 760, OECD Publishing.
    2. Mikkel Hermansen & Oliver Röhn, 2017. "Economic resilience: The usefulness of early warning indicators in OECD countries," OECD Journal: Economic Studies, OECD Publishing, vol. 2016(1), pages 9-35.
    3. Godfrey Akileng & Abbot Anthony Ogwang & Charles Ssendyona, 2018. "Determinants of performance of securities exchanges in East Africa," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 7(3), pages 1-3.
    4. Mohn, Klaus, 2016. "Resource revenue management and wealth neutrality in Norway," Energy Policy, Elsevier, vol. 96(C), pages 446-457.
    5. Mohn, Klaus, 2015. "Resource revenue management and wealth neutrality," UiS Working Papers in Economics and Finance 2015/2, University of Stavanger.
    6. Oliver Röhn & Aida Caldera Sánchez & Mikkel Hermansen & Morten Rasmussen, 2015. "Economic resilience: A new set of vulnerability indicators for OECD countries," OECD Economics Department Working Papers 1249, OECD Publishing.
    7. Arnon Barak, 2017. "The private consumption function in Israel," Bank of Israel Working Papers 2017.04b, Bank of Israel.
    8. Arnon Barak, 2018. "The Private Consumption Function In Israel," Israel Economic Review, Bank of Israel, vol. 16(1), pages 65-103.
    9. Douglas Sutherland & Peter Hoeller & Rossana Merola & Volker Ziemann, 2012. "Debt and Macroeconomic Stability," OECD Economics Department Working Papers 1003, OECD Publishing.
    10. Douglas Sutherland & Peter Hoeller, 2012. "Debt and Macroeconomic Stability: An Overview of the Literature and Some Empirics," OECD Economics Department Working Papers 1006, OECD Publishing.

    More about this item

    Keywords

    accélérateur financier; aggregate fixed investment; asset prices; canal du crédit; credit channel; effet de patrimoine sur la consommation; financial accelerator; incertitude; investissement fixe total; prix des actifs; Q de Tobin; Tobin's Q; uncertainty; wealth effect on consumption;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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