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The Rise and Fall of Consumption in the '00s. A Tangled Tale

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  • Demyanyk, Yuliya
  • Hryshko, Dmytro
  • Luengo-Prado, Maria
  • S�rensen, Bent E

Abstract

U.S. consumption has gone through steep ups and downs since 2000. We quantify the statistical impact of income, unemployment, house prices, credit scores, debt, financial assets, expectations, foreclosures, and inequality on county-level consumption growth for four subperiods: the "dot-com recession'' (2001--2003), the "subprime boom'' (2004--2006), the Great Recession (2007--2009), and the "tepid recovery'' (2010--2012). Consumption growth cannot be explained by a few factors; rather, it depends on a large number of variables whose explanatory power varies by subperiod. Growth of income, growth of housing wealth, and fluctuations in unemployment are the most important determinants of consumption, significantly so in all subperiods, while fluctuations in financial assets and expectations are important only during some subperiods. Lagged variables, such as the share of subprime borrowers, are significant but less important.

Suggested Citation

  • Demyanyk, Yuliya & Hryshko, Dmytro & Luengo-Prado, Maria & S�rensen, Bent E, 2017. "The Rise and Fall of Consumption in the '00s. A Tangled Tale," CEPR Discussion Papers 12522, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12522
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    References listed on IDEAS

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    Cited by:

    1. Mairead de Roiste & Apostolos Fasianos & Robert Kirkby & Fang Yao, 2019. "Household Leverage and Asymmetric Housing Wealth Effects- Evidence from New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2019/01, Reserve Bank of New Zealand.
    2. Mairead Roiste & Apostolos Fasianos & Robert Kirkby & Fang Yao, 2021. "Are Housing Wealth Effects Asymmetric in Booms and Busts?," The Journal of Real Estate Finance and Economics, Springer, vol. 62(4), pages 578-628, May.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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