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Stock Market Wealth Effects and the New Economy: A Cross‐Country Study[Note 1. This paper builds upon Chapter 2 of the World ...]
Author(s) -
Edison Hali,
Sløk Torsten
Publication year - 2002
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/1468-2362.00085
Subject(s) - economics , stock market , stock (firearms) , valuation (finance) , consumption (sociology) , private consumption , economy , monetary economics , finance , mechanical engineering , paleontology , social science , horse , sociology , engineering , fiscal policy , biology
This paper investigates the impact from changes in ‘new’ and ‘old’ economy stock valuations on private consumption. The results from estimating a reduced form VAR for seven OECD countries for the 1990s suggest that the impact from changes in old economy stock valuations on consumption is, in general, larger in countries with market‐based financial systems (USA, Canada and the UK) than in countries with bank‐based financial systems (continental Europe). Furthermore, the results indicate that the impact from changes in new economy valuations to consumption is roughly the same in the USA, Canada, the UK and in continental Europe. In addition, the results suggest that, in continental Europe, the impact on consumption from changes in the valuation of new economy stocks is bigger than from the old economy stocks, whereas for the Anglo‐Saxon countries, the impact is more or less the same between the two sectors.