How important is the stock market effect on consumption?

Sydney Ludvigson and Charles Steindel

No 9821, Research Paper from Federal Reserve Bank of New York

Abstract: The 1990s have seen astonishing growth in the stock market portfolios of Americans, which many have argued has been a major force behind the growth of consumer spending. This paper reviews the relationship between the stock market and the consumer. Using a variety of econometric techniques and specifications, we fail to find evidence of a stable relationship between aggregate consumer spending and changes in aggregate household wealth. While stock market gains have surely provided some support for consumer spending, our hard knowledge is too limited to feel comfortable relying on estimates of the stock market effect in macroeconomic forecasts.

Keywords: Investments; Wealth; Consumption (Economics) (search for similar items in EconPapers)
Date: 1998
New Economics Papers: this item is included in nep-fmk
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Citations: View citations in EconPapers (1)

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Journal Article: How important is the stock market effect on consumption? (1999)
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