IMF Working Papers

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

By Luis Catão, Ramana Ramaswamy

April 1, 1995

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Format: Chicago

Luis Catão, and Ramana Ramaswamy. Recession and Recovery in the United Kingdom in the 1990'+L927s: A Vector Autoregression Approach, (USA: International Monetary Fund, 1995) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Consumption, Econometric analysis, Financial services, Foreign exchange, Government consumption, National accounts, Real exchange rates, Real interest rates, Vector autoregression

Keywords: Consumption, Consumption shock, Expenditure variable, Government consumption, Household wealth-GDP ratio, Real exchange rates, Real interest rates, Savings ratio, Shocks--impulse-response function, Simultaneity bias problem--consumption residual, Stage VAR, U.K. economy, Vector autoregression, WP

Publication Details

  • Pages:

    28

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1995/040

  • Stock No:

    WPIEA0401995

  • ISBN:

    9781451845914

  • ISSN:

    1018-5941

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