Stock Market Wealth and Consumption

Poterba, James M.

doi:10.1257/jep.14.2.99

Cited by 507 publications

(293 citation statements)

References 15 publications

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“…This is in line with other studies that present doubts about the channels by which the wealth effect operates (Poterba, 2000, andMcCarthy andSteindel, 2006). Consider the following explanation.…”

Section: Discussionsupporting

confidence: 89%

“…For the USA, Skinner (1996) finds a large and significant effect of housing wealth on consumption using aggregate data, even if in some specifications (for instance, when the long term interest rate is included in the model) the significance disappears. More recently, Belsky and Prakken (2004) find evidence in favor of the housing wealth effect, while Poterba (2000) and Juster et al (2006) concentrate on the financial wealth effect. Turning to panel studies, Case et al (2005) study both the financial and the housing wealth effect for a panel of 14 countries, finding a significant effect for the latter only; Edison and Slok (2002) study the financial wealth effect in 7 different countries.…”

Section: The Empirical Literaturementioning

confidence: 99%

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Global imbalances and household savings: The role of wealth

Salotti

2010

The Social Science Journal

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Many claim that fluctuations in US private savings help to create and to sustain global imbalances because of their influence on the current account deficit. To test this claim, this paper investigates the determinants of aggregate household savings using a panel of 18 developed countries for the period 1980-2005. We weave two strands of literature: the first strand from consumer theory, considering specifically the `wealth effect', the second strand from aggregate private savings theory. The original contribution of this paper derives from the main explanatory variables of the household savings function: two measures of household wealth, the first a financial variable and the second a variable for tangible/housing stock. The salience of these variables has not been tested before. The model is then enriched with variables taken from the private savings literature.To find the best technique to estimate the long run savings function, unit root and cointegration tests are carried out, from which evidence of a cointegrating relationship is found. The group means FMOLS is used to estimate the model. The empirical evidence suggests effects consistent with theory: an increase in wealth negatively affects household savings. Furthermore, when important explanatory variables, such as government savings and population dependency ratios, are included in the model, tangible wealth becomes the only kind of wealth to (weakly and negatively) influence household savings in developed countries. In the US however, wealth does not seem to affect household savings negatively, it seems instead that government savings and population changes better explain the decline of savings during the past two decades. This finding provides additional evidence on the issue of global imbalances, and suggests that the recent booms of the stock and the real estate markets should not be blamed for the decline in US household and private savings.JEL: E21, C23

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Section: Discussionsupporting

confidence: 89%

Section: The Empirical Literaturementioning

confidence: 99%

Global imbalances and household savings: The role of wealth

Salotti

2010

The Social Science Journal

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“…The first is the wealth effect where higher stock prices translate into greater wealth and optimism (Poterba, 2000). Secondly, stock prices provide a useful leading indicator on future economic conditions, which in turn may determine consumer behavior as households formulate their future income and wealth expectations (Otoo, 1999).…”

Section: Mood and Tourism Demandmentioning

confidence: 99%

Sentiment, mood and outbound tourism demand

Dragouni

Filis

Gavriilidis

et al. 2016

Annals of Tourism Research

118

110

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We investigate spillover effects from sentiment and mood shocks on US outbound tourism demand from 1996 until 2013. We use the Index of Consumer Sentiment and Economic Policy Uncertainty Index as proxies for sentiment and the S&P500 as a proxy for mood. We find a moderate to high interrelationship among sentiment, mood and outbound tourism demand. More importantly, sentiment and mood indicators are net transmitters of spillover shocks to outbound tourism demand. The magnitude of spillover effects sourced by sentiment and mood is time-varying and depends on certain socio-economic and environmental events. Our results have important implications for policymakers and travel agents in their efforts to predict tourism arrivals from key origin countries and to plan their tourism strategy.

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“…For example, housing represents both an asset and a consumption item. If house prices increase, wealth may rise, but also the cost of housing services (Poterba, 2000). Increases in the value of owner-occupied housing do not foster the ability of a household to consume more of other goods and services unless that household is willing to realise the increased value by moving into a less expensive flat.…”

Section: Introductionmentioning

confidence: 99%