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Title: Wealth Effects
Authors: Bose, Amitava
Keywords: Capital goods
Housing wealth
Intertemporal economics
Multi-period model
Patinkin real balance effect
Pigou effect
Wealth effects
Issue Date: 2012
Publisher: SCOPUS
Dimensions of Economic Theory and Policy: Essays for Anjan Mukherji
Oxford University Press
Abstract: The recent global financial crisis, triggered by a decline in housing prices, has drawn attention to a controversial issue: the importance of 'wealth effects' in macroeconomics. This chapter explores this debate by analysing the effects of changes in prices of financial and real assets in an explicit intertemporal general equilibrium framework. It describes a multi-period model in which the value of a stock of wealth is the present value of the income stream that flows from it. Hence, the income effect of a static theory becomes the wealth effect of intertemporal economics. In addition, the chapter looks at some well-known debates such as the 'Patinkin Real Balance Effect' (RBE) and the 'Pigou effect' and discusses the liquidity trap, RBE in the overlapping generations model with money and capital, RBE in the representative agent model, bonds and capital goods, and housing wealth. © Oxford University Press 2011. All rights reserved.
Description: Bose, Amitava, Department of Economics, Indian Institute of Management, Kolkata, India
ISSN/ISBN - 978-019908161-5;0198073976;978-019807397-0
DOI - 10.1093/acprof:oso/9780198073970.003.0009
Appears in Collections:Economics

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