The econometric model of the U.S. economy in use today at the Federal Reserve Board includes a wealth effect as well, although somewhat smaller in size. Not all researchers agree, but most statistical studies suggest that an additional dollar of household wealth leads, over time, to a permanent rise in household consumption of about three to five cents.
An important question for both economists and policymakers is whether households’ net worth summarizes all of the information about their balance sheets that is useful in predicting their spending, or whether a decomposition of net worth into various asset and liability categories can improve forecasts of their spending. Unfortunately, this question has proved difficult to answer.