Consumption and the Great Recession
We document some key facts about aggregate consumption and its subcomponents over time. We then document the behavior of some important determinants of consumption, such as consumers' expectations about their future income, and changes in the consumers' wealth positions. Finally, we use a simple permanent income model to show that the observed drop in consumption during the Great Recession can be explained by the observed drops in wealth and income expectations.
We thank Richard Porter and an anonymous referee for helpful comments and Helen Koshy for editorial advice. The views expressed in this paper are those of the authors and not necessarily those of the Federal Reserve Bank of Chicago, the Federal Reserve System, or the National Bureau of Economic Research.
Mariacristina De Nardi & Eric French & David Benson, 2012. "Consumption and the Great Recession," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 1-16. citation courtesy of