The Rise and Fall of Consumption in the '00s

51 Pages Posted: 28 Oct 2015

See all articles by Yuliya Demyanyk

Yuliya Demyanyk

University of Illinois at Chicago

Dmytro Hryshko

University of Alberta

Maria Jose Luengo-Prado

Indus Center for Academic Excellence

Bent E. Sørensen

University of Houston - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: 2015-10-16

Abstract

The major portion of U.S. gross domestic product (GDP) is accounted for by consumer spending, which significantly affects the business cycle. Consumer demand has been extremely volatile since 2000, especially given the booms and busts in housing values and in subprime mortgage lending. While it is well-established that housing net worth, credit availability, and household debt levels help to explain changes in consumer spending, the roles played by other potential determinants of consumption are not well identified or understood. This paper uses county-level data and a multiple-regression framework to explore how fluctuations in consumption between 2000 and 2012 are correlated with these macroeconomic variables: income, unemployment, debt, income inequality, consumer expectations, housing wealth, credit access, cash-out refinancings, and foreclosures. Four subperiods are considered: the "dot-com" recession (2001-2003), the "subprime boom" (2004-2006), the Great Recession (2007-2009), and the "tepid recovery" (2010-2012).

JEL Classification: E21, E37

Suggested Citation

Demyanyk, Yuliya and Hryshko, Dmytro and Luengo-Prado, Maria Jose and Sorensen, Bent E., The Rise and Fall of Consumption in the '00s (2015-10-16). FRB of Boston Working Paper No. 15-12, Available at SSRN: https://ssrn.com/abstract=2681567

Yuliya Demyanyk (Contact Author)

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Dmytro Hryshko

University of Alberta ( email )

Edmonton, Alberta T6G 2R3
Canada

Maria Jose Luengo-Prado

Indus Center for Academic Excellence ( email )

Bent E. Sorensen

University of Houston - Department of Economics ( email )

204 McElhinney Hall
Houston, TX 77204-5882
United States
713-743-3841 (Phone)
713-743-3798 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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