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Economists call this a wealth effect.
2. Albert Kyle and Wei Xiong (2001), Contagion as a Wealth Effect, Journal of Finance 56, 1401-1440.
This means moving monetary policy away from exhausting a wealth effect stimulus, to generating demand that is sustainable.
Before the collapse, the very existence of a wealth effect tied to housing was debated among some economists.
One way that QE might work is via a wealth effect - as consumers feel richer, they will spend more.
Assuming a wealth effect of six cents on the dollar, the bubble wealth was generating close to $500bn a year in increased consumption.
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I think if consumer confidence increases due to a positive wealth effect, then an electronics chain that has a lot of brand equity should do well.
Real assets are not significant, which may be the net outcome of a positive wealth effect and a negative lock-in effect stemming from homeownership.
That phenomenon — known as a "negative wealth effect" — is a psychological effect that takes hold when investors feel less prosperous because of stock market declines, prompting a pullback in spending that affects decisions about future business expansion and hiring.
"Japan's exporters are being hammered and there is a significant risk of a negative wealth effect from the falls in the stock market," said Jesper Koll, chief executive of Tantallon Research Japan in Tokyo.
"A negative wealth effect leads to a drop in consumer spending and more foreclosures.
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