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The Rise and Fall of Consumption in the 2000s

Author

Listed:
  • Demyanyk, Yuliya

    () (Federal Reserve Bank of Cleveland)

  • Luengo-Prado, Maria Jose

    () (Federal Reserve Bank of Boston)

  • Hryshko, Dmytro

    () (University of Alberta)

  • Sorensen, Bent E.

    () (University of Houston)

Abstract

U.S. consumption has gone through steep ups and downs since the turn of the millennium, but the causes of these fluctuations are still imperfectly identified. We quantify the relative impact on consumption growth of income, unemployment, house prices, credit scores, debt, expectations, foreclosures, inequality, and refinancings 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). We document that the explanatory power of different factors varies by subperiods, implying that a successful modeling of this decade needs to allow for multiple causal determinants of consumption.

Suggested Citation

  • Demyanyk, Yuliya & Luengo-Prado, Maria Jose & Hryshko, Dmytro & Sorensen, Bent E., 2015. "The Rise and Fall of Consumption in the 2000s," Working Papers (Old Series) 1507, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:1507
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    consumption growth; wealth effects; income inequality; debt overhang; consumer credit; consumer expectations; foreclosures; cash-out refi nancing; dot-com recession; subprime boom; Great Recession; tepid recovery;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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