IDEAS home Printed from https://ideas.repec.org/p/nsr/niesrd/344.html
   My bibliography  Save this paper

Project on consumption and saving for the DWP - comparative analysis of consumption and saving in the UK and US

Author

Listed:
  • Iana Liadze
  • Ray Barrell

Abstract

In this note we compare consumption behaviour in the US and the UK with a special focus on the scale of, and differences in, the impacts of changes in income, financial and housing wealth, both over time and between countries. It is common to claim that theory tells us housing wealth is not wealth, and hence it should not impact on consumption. We investigate these issues first by searching for patterns of cointegration and causality between consumption, income and wealth in the UK and the US. Using these results we investigate the effects of changes in asset prices on consumption in the UK and the US using the National Institute Global Model, NiGEM under different sets of assumptions. A temporary 10 percent fall in the price of houses will in both countries increase the savings ratio by around 1 percentage point, with the effect being marginally larger in the UK than the US. It is relatively clear from the data, but not from theory, that a permanent change in real house prices will have a similar effect on the saving ratio. Hence a 30 per cent fall in real house prices in either country would raise saving by around 1_ percentage points. The effects of a fall in equity prices of a similar magnitude would have about a sixth of the effects, as we would expect from estimated equations.

Suggested Citation

  • Iana Liadze & Ray Barrell, 2009. "Project on consumption and saving for the DWP - comparative analysis of consumption and saving in the UK and US," National Institute of Economic and Social Research (NIESR) Discussion Papers 344, National Institute of Economic and Social Research.
  • Handle: RePEc:nsr:niesrd:344
    as

    Download full text from publisher

    File URL: https://www.niesr.ac.uk/wp-content/uploads/2021/10/dp344-2.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dr Justin van de Ven & Dr Martin Weale, 2009. "Consumption, employment uncertainty, and capital losses," National Institute of Economic and Social Research (NIESR) Discussion Papers 346, National Institute of Economic and Social Research.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nsr:niesrd:344. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Library & Information Manager (email available below). General contact details of provider: https://edirc.repec.org/data/niesruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.