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Drivers of Post-COVID Private Consumption in the U.S

Author

Listed:
  • Mai Dao
  • La-Bhus Fah Jirasavetakul
  • Jing Zhou

Abstract

Private consumption in the U.S. has recovered swiftly from the pandemic trough and has been running above the pre-pandemic trend even as interest rates rose sharply. This paper examines the underlying drivers for this strong growth in consumption. Using both state- and household-level data, we find that excess savings from the pandemic, large increases in household wealth (especially housing), along with solid real income gains contributed to strengthening post-pandemic consumption. Compared with pre-COVID estimates, the marginal propensity to consume out of housing wealth is substantially higher, which, together with large gains in housing prices, made the wealth effect a key driver for post-pandemic consumption growth.

Suggested Citation

  • Mai Dao & La-Bhus Fah Jirasavetakul & Jing Zhou, 2024. "Drivers of Post-COVID Private Consumption in the U.S," IMF Working Papers 2024/128, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2024/128
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