Stock Market Developments and Private Consumer Spending in Emerging Markets

24 Pages Posted: 15 Feb 2006

See all articles by Norbert Funke

Norbert Funke

International Monetary Fund (IMF) - African Department

Date Written: December 2002

Abstract

Using a panel of 16 emerging markets, the paper finds a small but statistically significant effect of stock market developments on private consumption spending. In the short run, a 10 percent decline in the annual real stock market return is associated with a reduction in real private consumption by around 0.1-0.3 percent on average. There is evidence that the link between stock market fluctuations and private consumption has become stronger during the 1990s as stock markets in emerging economies have broadened and deepened. However, there is no significant evidence that the influence is asymmetric. Stock price declines do not have a different impact on consumption than stock price increases.

Keywords: Consumption Stock market Financial wealth

JEL Classification: E20 E30 G1

Suggested Citation

Funke, Norbert, Stock Market Developments and Private Consumer Spending in Emerging Markets (December 2002). IMF Working Paper No. 02/238, Available at SSRN: https://ssrn.com/abstract=880945

Norbert Funke (Contact Author)

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

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