Title: A Causal Analysis of Changes in Korean Household Consumption After the Global Financial Crisis

Author: Young Jun Choi(BOK)

 In general, consumption plays a counter-cyclical role to smooth the amplitude of the growth rate while showing a stable flow. However, in Korea after the global financial crisis, while sluggish consumption continued, a pro-cyclicality of household consumption appeared in the business cycle contraction period. Previous studies have only analyzed the cause of sluggish consumption and have argued that the phenomenon was mainly due to the weakening of expected future incomes among people in their 50s and 60s. However, these studies may not adequately analyze consumption behavior by constructing cohorts of five-year age groups that lack economic significance.

  Against this background, in this paper, instead of analyzing cohorts of five-year units, a cohort analysis of those specific generations was used to analyze the pro-cyclicality of household consumption. This is due to the fact that consumption changes are highly likely to have been led by generations born at similar historical times and with similar socio-cultural backgrounds. 

 Findings show that the pro-cyclicality of household consumption was mainly due to the consumption behavior between “generation MZ,” i.e., Millennials and Gen Z, and the pre-Baby Boom generation.