The effects of stock market movements on consumption and investment: does the shock matter?

Stephen Millard and John Power

Bank of England working papers from Bank of England

Abstract: This paper uses a simple model to examine the links between equity price movements and consumption and investment. Generally, the effect of a given movement in equity prices on consumption depends on the underlying source of the shock to equity prices, and some empirical evidence is presented that supports this. Furthermore, in the model the effect of a given movement in equity prices on investment does not depend on the source of the shock. However, some theoretical arguments and empirical evidence are provided to suggest that it might in the real world.

Date: 2004-10
New Economics Papers: this item is included in nep-fin and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:236

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