Wealth effects on consumption: evidence from the euro area

This paper estimates the wealth effects on consumption in the euro area as a whole. Ishow that: (i) financial wealth effects are relatively large and statistically significant;(ii) housing wealth effects are virtually nil and not significant; (iii) consumptiongrowth exhibits strong persistence and responds sluggishly to shocks; and (iv) theimmediate response of consumption to wealth is substantially different from the longrunwealth effects. By disaggregating...