Working Paper

The Rise and Fall of Consumption in the 2000s


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.

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; E24;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2015-05-21

Number: 1507

Pages: 51 pages