Abstract
This article estimates equity wealth effects on euro area consumption, splitting equity returns into fundamental- and bubble-related components. The equity wealth effect is fundamental-driven, particularly strong since 1994, and operates comparatively quickly during negative bubble returns.
Acknowledgement
The usual disclaimer applies. I thank Julian Morgan for his comments.
Notes
1The estimates confirm excess sensitivity of consumption to current income, whereas habit persistence is not always statistically significant. They are not reported to save space.