Nottingham Trent University
Overview
This project aims to assess the macroeconomic effects of stock prices in the UK. Specifically, it will explore the effects of UK stock prices on: i) consumption (at different wealth levels), ii) labor market outcomes (for different skill groups and industries), iii) the monetary policy reaction of the Bank of England.
For the US, using textual analysis of the Federal Open Market Committee documents, Cieslak and Vissing-Jorgensen (2021) document that Fed policymakers do pay attention to the stock market as they believe that stock prices affect the labor market through a consumption wealth effect. Whether this is also the case in the UK is an open question. But before answering this question, measuring (i.e., estimating) those (wealth) effects on UK consumption and the labor market will be the first step. In the second step, the project will explore the minutes of the Monetary Policy Committee of the Bank of England to understand how the Bank reacts to stock market fluctuations. In the third step, the project will develop a dynamic general equilibrium model, similar to Çenesiz and Guimarães (2022), who show that income effects have important (qualitative and quantitative) effects on the labor market. The model will then be used to analyse a number of policy relevant questions (e.g., optimal monetary policy).
Indicative Literature
Caballero, R.J., Simsek, A. (2024). Central banks, stock markets, and the real economy. NBER Working Paper No 32053.
Campbell, J.Y., Cocco, J.F. (2007). How do house prices affect consumption? Evidence from micro data. Journal of Monetary Economics, 54 (3), 591-621.
Case, K.E., Quigley, J.M., Shiller, R.J. (2005). Comparing wealth effects: the stock market versus the housing market. Advances in Macroeconomics, 5 (1).
Çenesiz, M.A., Guimarães, L. (2022). The cyclicality of job search effort in matching models. Oxford Economic Papers, 74(4), 1195-1213.
Cieslak, A., Vissing-Jorgensen, A., (2021). The economics of the Fed Put. The Review of Financial Studies, 34(9), 4045-4089.
Chodorow-Reich, G., Nenov, P.T., Simsek, A. (2021). Stock market wealth and the real economy: A local labor market approach. American Economic Review, 111 (5), 1613-1657.
Di Maggio, M., Kermani, A., Majlesi, K. (2020). Stock market returns and consumption. The Journal of Finance, 75 (6), 3175-3219.
Guren, A. M., McKay, A., Nakamura, E., Steinsson, J. (2020). Housing wealth effects: The long view. The Review of Economic Studies, 88(2), 669-707.
Contact
For informal enquiries about this project, please contact: Dr Dimitrios Bakas ([email protected]) and Dr Alper Cenesiz ([email protected])
Entry qualifications
Entrants must have an undergraduate degree in Economics or related studies and/or, preferably, a postgraduate degree in Economics or Finance, with very good knowledge of econometrics/mathematical modelling and experience in macroeconometrics using econometrics software.
Fees and funding
This is a self-funded PhD project for UK applicants.
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