Household Wealth Effects and the US Macroeconomy
Title
Household Wealth Effects and the US Macroeconomy
Author
Dynan, Karen
Cooper, Daniel
Research Area
Social Institutions
Topic
Work and the Economy
Abstract
The effect of wealth on consumption is an issue of long‐standing interest to economists. Analysts believe that fluctuations in household wealth have driven major swings in economic activity. This essay considers the so‐called “wealth effects”—the impact of changes in wealth on household consumption and the overall macroeconomy. There is an extensive existing literature on wealth effects, but there are also many unanswered issues and questions. This essay reviews the important issues regarding the role wealth plays in the macroeconomy and argues that there is a need for much more wealth effect research as well as better data sources for conducting such analysis.