The article illustrates how the integration of modern theory of finance and stochastic dynamic macroeconomic analysis provides a deeper understanding of the link between asset prices and consumption. It shows that this approach gives only a partial explanation for recent trends in US...

In this paper we use a disequilibrium framework common in the “credit crunch†literature, first to examine whether the slow credit growth in Morocco during the rapid expansion of liquidity in the first half of the decade can be attributed to credit rationing, and second to investigate...

This paper presents a simple new method for estimating the size of wealth effects on aggregate consumption. The method exploits the well-documented sluggishness of consumption growth (often interpreted as habits in the asset pricing literature) to distinguish between short-run and long-run...

Much of the literature on the effect of housing wealth on consumption has been embedded in a simple life-cycle model in which housing price changes work as a "wealth effect". In such models, windfall gains in housing always lead to positive changes in consumption. However, this might be a...

This paper presents a general result on the random selection of an element from an ordered sequence of risks and uses this result to derive additive and cross risk apportionment. Preferences favoring an improvement of the sampling distribution in univariate or bivariate first-order stochastic...

There has been a resurgence of interest in the effect of stock price changes on the real economy in the wake of the long stock market boom of the 1990s and the subsequent correction starting in 2000. One of the primary variables linking the stock market and output is consumption expenditure,...

In this research, we compare the effect of aggregate U.S. financial wealth with the effect of aggregate U.S. labor income on house prices at the national and city levels. Financial wealth is measured by the net worth of U.S. households minus the equity of owners in home real estate or by the...

Much of the literature on the effect of housing wealth on consumption has been embedded in a simple life-cycle model in which housing price changes work as a wealth effect. In such models, windfall gains in housing always lead to positive changes in consumption. However, this might constitute a...