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Owen also confuses rebound with wealth effects.
Eurozone stock markets could rise, leading to positive wealth effects.
There has, unsurprisingly, been a lot of work trying to estimate wealth effects.
Prolonged and pronounced market stress could have adverse wealth effects, impact confidence and result in tighter financial conditions globally.
Most stockmarkets are much smaller in relation to GDP than in developed economies, so the wealth effects of a crash would be modest.
If both these wealth effects turn negative, the blow to consumption could be severe, and the current recession could be deeper than most economists now forecast.
Spending will be helped by better job growth, more bank credit and the wealth effects (for some) of higher house prices.
"Consumers struggling with high inflation, negative wealth effects, falling home prices and increased job insecurity mean imports will fall back much further this year," Dimitry Fleming, an economist at ING Bank in London, wrote in a note to clients.
"He sees rising interest rates as the force that will ultimately cap the equity market's advance, contain equity wealth effects, and thereby rein in excess demand," said Robert J. Barbera, the chief economist of Hoenig & Company.
As Mr Bernanke remarked in a speech a few months ago, this suggests that changes in property prices should affect consumer spending by more than conventional wealth effects imply.
Similar(1)
Because it is hard to reduce debt quickly, he thinks consumption is vulnerable to a downturn in asset prices.For America, his results are preliminary, but qualitatively similar: more liberal credit has increased housing-wealth effects in the United States too.
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