Author: Young Jun Choi(Bank of Korea)

Household consumption in Korea has not recovered from the previous increase after slowing down relatively significantly through major macroeconomic shocks such as the 1997 currency crisis and the 2008 global financial crisis. Against this background, this paper empirically analyzed whether scar consumption appears in Korea using micro-panel data. The finding is that the past unemployment experience had a statistically significant negative effect on household consumption. These results imply that there is a need to prepare for the possibility of a long-term sluggish consumption after the macroeconomic shock.