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Wealth Shocks and Macroeconomic Dynamics

Wealth Shocks and Macroeconomic Dynamics, Daniel Cooper- Federal Reserve Bank of Boston; Karen Dynan – Brookings Institution. June 2013

“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 article considers 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  article 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.”

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