The Stock Market and the Consumer Confidence Channel in Canada
When stock prices rise, so does aggregate consumer spending. A traditional explanation for this phenomenon is based on wealth effects. However, movements of the stock market may affect consumer spending indirectly, by influencing consumer confidence. A bullish stock market may make consumers feel more optimistic about the future of the aggregate economy, and hence increase their spending. This paper investigates the existence of the consumer confidence channel of asset price transmission in Canada. The analysis is based on the indices of consumer confidence from the Conference Board of Canada and the Toronto Stock Exchange index. The results are supportive of the consumer confidence channel at the national level. There is also evidence of asymmetric effects of stock price changes on confidence changes: declines of the stock index have larger and statistically more significant effects relative to its increases.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (613) 562-5753
Fax: (613) 562-5999
Web page: http://www.socialsciences.uottawa.ca/eco/eng/index.asp
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Matthew Brzozowski & Martin Gervais & Paul Klein & Michio Suzuki, 2010.
"Consumption, Income, and Wealth Inequality in Canada,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 52-75, January.
- Brozozowski, Matthew & Gervais, Martin & Klein, Paul & Suzuki, Micho, 2009. "Consumption, income, and wealth inequality in Canada," Discussion Paper Series In Economics And Econometrics 0904, Economics Division, School of Social Sciences, University of Southampton.
- Matthew Brzozowski & Martin Gervais & Paul Klein & Michio Suzuki, 2009. "Code and data files for "Consumption, Income, and Wealth Inequality in Canada"," Computer Codes 09-206, Review of Economic Dynamics.
- George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
- Lise Pichette & Dominique Tremblay, 2003.
"Are Wealth Effects Important for Canada?,"
03-30, Bank of Canada.
- W. Jos Jansen & Niek J. Nahuis, 2002.
"The Stock Market and Consumer Confidence: European Evidence,"
MEB Series (discontinued)
2002-11, Netherlands Central Bank, Monetary and Economic Policy Department.
- Jansen, W. Jos & Nahuis, Niek J., 2003. "The stock market and consumer confidence: European evidence," Economics Letters, Elsevier, vol. 79(1), pages 89-98, April.
- Andy C.C. Kwan & John A. Cotsomitis, 2006. "The Usefulness of Consumer Confidence in Forecasting Household Spending in Canada: A National and Regional Analysis," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 185-197, January.
- Flacco, Paul R & Parker, Randall E, 1992. "Income Uncertainty and the Onset of the Great Depression," Economic Inquiry, Western Economic Association International, vol. 30(1), pages 154-71, January.
- James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
- O. David Gulley & Jahangir Sultan, 1998. "Consumer confidence announcements: do they matter?," Applied Financial Economics, Taylor & Francis Journals, vol. 8(2), pages 155-166.
When requesting a correction, please mention this item's handle: RePEc:ott:wpaper:1004e. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Diane Ritchot)
If references are entirely missing, you can add them using this form.