Premium
WEALTH EFFECTS AND MACROECONOMIC DYNAMICS
Author(s) -
Cooper Daniel,
Dynan Karen
Publication year - 2016
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/joes.12090
Subject(s) - economics , consumption (sociology) , wealth effect , wealth elasticity of demand , national wealth , consumer spending , autonomous consumption , wealth distribution , dynamics (music) , macroeconomics , monetary economics , aggregate expenditure , monetary policy , finance , inequality , recession , physics , acoustics , mathematical analysis , social science , mathematics , sociology
The effect of wealth on consumption is an issue of long‐standing interest to economists. Conventional wisdom suggests that fluctuations in household wealth have driven major swings in economic activity both in the United States and abroad. This paper considers the so‐called consumption wealth effects. There is an extensive existing literature on wealth effects that has yielded some insights. For example, research has documented the relationship between aggregate household wealth and aggregate consumption over time, and a large number of household‐level studies suggest that wealth effects are larger for households facing credit constraints. However, there are also many unresolved issues regarding the influence of household wealth on consumption. We review the most important of these issues and argue that there is a need for much more research in these areas as well as better data sources for conducting such analysis.