- Home
- Publications
- Project On Consumption And Saving For The DWP – Comparative Analysis Of Consumption And Saving In The UK And US
Project on consumption and saving for the DWP – comparative analysis of consumption and saving in the UK and US
Downloads
dp344Related Themes
Productivity, Trade, and Regional EconomiesPaper Category Number
344
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.
Related Blog Posts
Exploring the Data on UK Productivity Performance
Issam Samiri
Stephen Millard
11 Dec 2023
4 min read
UK Investment Past and Prospects: A Framework for Analysis
Catherine Mann
01 Dec 2023
6 min read
Where Are We With Regional Inequalities in the UK?
Adrian Pabst
Jagjit S. Chadha
01 Nov 2023
5 min read
Related Projects
Related News
Related Publications
UK Business Investment: Economists, Managers, Financiers
25 Apr 2024
UK Productivity Commission
The Nature of the Inflationary Surprise in Europe and the USA
21 Mar 2024
Discussion Papers