Feedback between the stock market and real economy

I have a short post up at the Paulson Institute blog, in response to a question about the impact of the sharp fall in Chinese stock prices. The even shorter version:

If the rising stock market has been supporting the real economy, then that support could well be in the process of unraveling. It’s difficult to find much strong evidence of such support.

Issues considered include the wealth effect, corporate investment, and the surprisingly large contribution of the financial sector to GDP.

One Comment

  1. I notice you don’t mention the suggestion that companies have been using stock market speculation to boost profits. If a crash hit corporate revenues through that channel, it might have a stronger effect on economic growth…

    Reply

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