Abstract
We examine how shocks emanating from changes in the stock wealth affect the consumption demand in India using a Bayesian VAR framework. The effect of the stock market wealth shock on consumption demand in India is relatively small in magnitude. The estimates suggest that a 10% increase in the real stock wealth raises the consumption demand by 0.3%, which seems to be consistent with some empirical estimates for the emerging market economies given a relatively low share of stock wealth in the household asset portfolio and its asymmetric distribution. The stock market wealth effect being short run in nature does not have a large and persistent effect on consumption demand since consumers may not perceive the changes in the stock wealth to cause a permanent shift in their wealth.
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Singh, B. How important is the stock market wealth effect on consumption in India?. Empir Econ 42, 915–927 (2012). https://doi.org/10.1007/s00181-010-0444-x
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DOI: https://doi.org/10.1007/s00181-010-0444-x