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How Much Does Household Consumption Impact Business Cycles?, No. 21-25

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How Much Does Household Consumption Impact Business Cycles?, No. 21-25

DATE: August 2021

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ABSTRACT: We identify shocks to household consumption using cross-sectoral information. We find that those shocks have accounted for close to 40 percent of pre-pandemic business cycle fluctuations in the U.S. Such shocks have the characteristics of demand shocks: They increase (or decrease) output, inflation and interest rates. The results imply that one might be able to significantly stabilize business cycles by stabilizing consumption fluctuations.

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Matthes, Christian, 1979- , Schwartzman, Felipe Farah, 1981- and Federal Reserve Bank of Richmond. "How Much Does Household Consumption Impact Business Cycles?, No. 21-25," Economic Brief (August 2021). https://fraser.stlouisfed.org/title/6034/item/604986, accessed on August 17, 2022.

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