Abstract
The growth of spending on consumer goods in the United Kingdom in recent years has been a severe test of previously well-established consumption functions. This paper assesses the performance of a dominant ‘standard’ consumption function which relies on income and net liquid assets; it turns out that this has not been able to track the growth in consumer spending. However, developments of this consumption function which find a role for the components of personal sector wealth perform rather well, with satisfactory diagnostic statistics and an estimated equation standard error of around 0.4%.
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