Consumption and the recession of 1990-1991

32 Pages·1993·0.68 MB·English

by  Blanchard, Olivier (Olivier J.)

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Consumption and the recession of 1990-1991
Olivier Blanchard
MIT and NBER
No. 93-5 Jan. 1993
DEWEY
M.I.T. LIBRARIES -
UBRAR
J.T.
AUG 2 1993'
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Consumption and the recession of 1990-1991.
Olivier Blanchard, MIT and NBER *
January 15, 1993
Abstract
The paper looks at the recession of 1990-91. It reaches two conclusions:
Not all recessions have the same dynamics. Decreases in output which come from
othersourcesthanconsumptionshocks tend tobeshortlived, and followed bysharp
recoveries. Decreases in output which come from consumption shocks, decreases
in consumption given income, tend to be longer lasting, and followed by weaker
recoveries.
In contrast to its predecessors, the recession of 1990-91 was caused primarily by a
consumption shock. Thus, conditional on the nature ofthose shocks, the slow re-
covery comes as nosurprise. Asoftheend of 1992, the economywas nearly exactly
on the trackgiven byadynamic forecastbasedon information up to thefirstquarter
of 1991.