The effect of wealth on consumption is an issue of longstanding interest to economists. Analysts believe that fluctuations in household wealth have driven major swings in economic activity. This paper considers so-called wealth effects - the impact of changes in wealth on household consumption...

This paper explores the household behavior that underlies the link between wealth and consumption at the aggregate level. One possibility is that changes in wealth directly cause changes in consumption through their effect on households? contemporaneous budget sets; another possibility is that...