After the Crisis: Lower Consumption Growth But Narrower Global Imbalances?

January 1, 2010

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Format: Chicago

Franziska L Ohnsorge, and Ashoka Mody. After the Crisis: Lower Consumption Growth But Narrower Global Imbalances?, (USA: International Monetary Fund, 2010) 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

We estimate consumption dynamics in the G-7 economies, paying particular attention to the possibility of precautionary behavior in the face of uncertainty. We find that in the short run, continued income uncertainty will significantly dampen consumption growth. As such, consumption in the G-7 economies is unlikely to be the engine that revives global growth. Differences in the pace and timing of consumption moderation have implications for the evolution of global imbalances. With the U.S. experiencing a sharper rise in unemployment and, perhaps, more widespread loss of financial wealth than elsewhere in the G-7, the relative rise of the U.S. savings rate is helping narrow global imbalances. But with a likely earlier recovery in the U.S., this narrowing could be short-lived. Moreover, long-term differences- in economic and financial volatility and in demographic structures-have been an important source of the imbalances and could soon reassert their prominence.

Subject: Consumption, Disposable income, Financial institutions, Financial markets, Income, National accounts, Stock markets, Stocks

Keywords: Business cycles, Consumption, Consumption behavior, Consumption growth, Consumption response, Current account adjustment, Disposable income, Global, Growth function, Income, Lagged consumption, Savings, Savings rate, Stock market volatility, Stock markets, Stocks, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/011
Stock No:

WPIEA2010011
ISBN:

9781451961966
ISSN:

1018-5941

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