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Recession and Recovery in the United Kingdom in the 1990'+L927s; A Vector Autoregression Approach


  • Luis Catão
  • Ramana Ramaswamy


This paper uses a vector autoregression (VAR) approach to identify the causes of the 1990-92 recession in the UK. The VAR approach is shown to be particularly pertinent for quantifying the relative magnitude of the different demand shocks, and in decomposing them into monetary and expectational factors. The main finding is that the recent recession was precipitated primarily by shocks to consumption, and that monetary factors explain just part of this contraction. The VAR model also offers interesting insights about the long duration of the recession and the nature of the recovery that is currently underway.

Suggested Citation

  • Luis Catão & Ramana Ramaswamy, 1995. "Recession and Recovery in the United Kingdom in the 1990'+L927s; A Vector Autoregression Approach," IMF Working Papers 95/40, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:95/40

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    References listed on IDEAS

    1. Olivier Blanchard & Andrei Shleifer, 2001. "Federalism With and Without Political Centralization: China Versus Russia," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 1-8.
    2. Feltenstein, Andrew & Iwata, Shigeru, 2005. "Decentralization and macroeconomic performance in China: regional autonomy has its costs," Journal of Development Economics, Elsevier, vol. 76(2), pages 481-501, April.
    3. Jin, Hehui & Qian, Yingyi & Weingast, Barry R., 2005. "Regional decentralization and fiscal incentives: Federalism, Chinese style," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1719-1742, September.
    4. Teresa Ter-Minassian, 1997. "Decentralization and Macroeconomic Management," IMF Working Papers 97/155, International Monetary Fund.
    5. Davoodi, Hamid & Zou, Heng-fu, 1998. "Fiscal Decentralization and Economic Growth: A Cross-Country Study," Journal of Urban Economics, Elsevier, vol. 43(2), pages 244-257, March.
    6. Zhang, Tao & Zou, Heng-fu, 1998. "Fiscal decentralization, public spending, and economic growth in China," Journal of Public Economics, Elsevier, vol. 67(2), pages 221-240, February.
    7. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    8. Murray Petrie & Richard Hemming, 2000. "A Framework for Assessing Fiscal Vulnerability," IMF Working Papers 00/52, International Monetary Fund.
    9. Yingyi Qian, 1999. "The Institutional Foundations of China's Market Transition," Working Papers 99011, Stanford University, Department of Economics.
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    Cited by:

    1. Palle S. Andersen, 1997. "Forecast errors and financial developments," BIS Working Papers 51, Bank for International Settlements.


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