Spending and Saving

  • Julia Darby
  • Jonathan Ireland


Consumption and saving decisions have important effects on individuals and on the whole economy. The chapter begins by examining recent trends in consumption and saving in the major European economies, before setting up a framework for analysis. It then examines the life cycle and permanent income hypotheses, and the Keynesian consumption function. An explanation is given of recent patterns of European consumption and saving, for example, by discussing the effect of financial liberalization. Finally comes an analysis of changes in the UK patterns of spending and saving, including the effect of recent building society windfalls.


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References and further reading

  1. Bank of England (1997) Inflation Report, August.Google Scholar
  2. Bayoumi, T. (1993) ‘Financial Deregulation and Household Saving’, Economic Journal, 103 (421): 1432–43.CrossRefGoogle Scholar
  3. Darby, J., Driver, R., Ireland, J. and Wren-Lewis, S. (1994) ‘Controlling Credit: The Macroeconomic Consequences of Reversing Financial Liberalisation’, New Economy, Summer, 95–100.Google Scholar
  4. Deaton, A. (1992) ‘Understanding Consumption’, Clarendon Lectures in Economics. Oxford: Clarendon Press.Google Scholar
  5. Jappelli, T. (1990) ‘Who is Credit Constrained in the US Economy?’, Quarterly Journal of Economics, 105. 1: 219–34.CrossRefGoogle Scholar
  6. Jappelli, T. and Pagano M. (1989) ‘Consumption and Capital Market Imperfection: An International Comparison’, American Economic Review, 79. 5: 1088–105.Google Scholar
  7. Mankiw, N. G. (1996) Macroeconomics, 3rd edn. New York: Worth, chapter 15.Google Scholar
  8. Muellbauer, J. (1996) ‘Consumer Expenditure’, in T. Jenkinson (ed.), Readings in Macroeconomics. Oxford University Press.Google Scholar
  9. Muellbauer, J. and Murphy, A. (1989) ‘Why has Personal Saving Collapsed?’, London: Credit Suisse First BostonGoogle Scholar
  10. Muellbauer, J. and Murphy, A. (1991) ‘Measuring Financial Liberalisation and Modelling Mortgage Stocks and Equity Withdrawal’. Mimeo. Oxford: Nuffield College.Google Scholar

Copyright information

© Julia Darby and Jonathan Ireland 1998

Authors and Affiliations

  • Julia Darby
  • Jonathan Ireland

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