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Recession and Recovery in the United Kingdom in the 1990'+L927s: A Vector Autoregression Approach
Author:
Mr. Luis Catão
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and
Mr. Ramana Ramaswamy
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Series:
IMF Working Papers
Volume/Issue:
Volume 1995: Issue 040
Language:
English
Publication Date:
01 Apr 1995
DOI:
https://doi.org/10.5089/9781451845914.001
ISBN:
9781451845914
ISSN:
1018-5941
Pages:
28
Keywords:
WP; consumption shock; savings ratio; stage VAR; shocks--impulse-response function; expenditure variable; U.K. economy; household wealth-GDP ratio; simultaneity bias problem--consumption residual; Consumption; Vector autoregression; Government consumption; Real exchange rates; Real interest rates
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund