Most banks in emerging market economies are also highly leveraged, but their supervision often has not proved adequate to forestall failures and a general financial crisis. The failure of some banks is highly contagious to other banks and businesses that deal with them, as the Asian crisis has so effectively demonstrated.
In fact, if we accept a total net wealth effect on consumption of 3 to 5 cents on the dollar, and if further analysis supports the larger net spending propensities from capital gains on homes suggested by mortgage and survey data, then the propensity to spend out of each dollar of stock market gains would be less than the propensity to spend out of a dollar from gains on homes, but still larger in overall dollar magnitude.