Report
To what extent does an equity market shock amplify real economy shocks?
The United States and the euro zone are once again suffering from a very sharp decline in equity markets, initially linked to the expected decline in real activity as a result of the coronavirus breakout. Could the equity market over-adjustment, which has already been noticeable in the past, amplify the decline in growth? To answer this question , we seek to determine to what extent a decline in share prices has an impact on: The household savings rate; Household housing investment ; Corporate investment . All things considered, the equity market over-adjustment has so far reduced domestic demand by 1.1 percentage point of GDP in the United States and 0.5 percentage point of GDP in the euro zone, which shows the scale of equity wealth effects in the United States.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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