Premium
Stock Market Wealth and Consumer Spending
Author(s) -
StarrMcCluer Martha
Publication year - 2002
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/40.1.69
Subject(s) - economics , wealth effect , consumer spending , stock (firearms) , liberian dollar , stock market , monetary economics , wealth elasticity of demand , shareholder , consumption (sociology) , national wealth , financial economics , macroeconomics , finance , monetary policy , mechanical engineering , paleontology , horse , recession , biology , engineering , corporate governance , social science , sociology
This article investigates the effects of stock market wealth on consumer spending. Traditional macroeconometric models estimate that a dollar's increase in stock wealth boosts consumption by three to seven cents. With the substantial 1990s rise in stock prices, the nature and magnitude of this “wealth effect” have been much debated. After describing the issues and previous research, I present new evidence from a well‐known consumer survey. The results are broadly consistent with life‐cycle saving and a modest wealth effect: most stockholders reported no appreciable effect of stock prices on their saving or spending, but many mentioned “retirement saving” in explaining their behavior.