Durable Goods and their Effect on Household Saving Ratios in the Euro Area

31 Pages Posted: 31 May 2007

See all articles by Jukka Jalava

Jukka Jalava

Pellervo Economic Research Institute

Ilja Kristian Kavonius

European Central Bank; Centre for Consumer Society Research, University of Helsinki

Date Written: May 2007

Abstract

The purpose of this paper is to estimate the impact of capitalising durable goods on the Euro area household saving ratios and disposable incomes for the first time. The reason for this exercise is twofold. Firstly, it is generally accepted that individual households regard consumer durables as assets even though they are not treated as such in the System of National Accounts 1993. Secondly, the issue is related to the definition of household saving ratios. For instance, the U.S. Federal Reserve Board publishes three household saving measures. The main difference between these saving ratios is that one is derived by treating expenditure on consumer durables as investments while the other ones are compiled by considering them to be household final consumption expenditure. We find that the effect of capitalising consumer durables on EA saving ratios is moderate. The impact is lower than it is in the US.

Keywords: durable good, asset, saving ratio, disposable income, user cost

JEL Classification: E21, E22

Suggested Citation

Jalava, Jukka and Kavonius, Ilja Kristian, Durable Goods and their Effect on Household Saving Ratios in the Euro Area (May 2007). ECB Working Paper No. 755. Available at SSRN: https://ssrn.com/abstract=985125

Jukka Jalava (Contact Author)

Pellervo Economic Research Institute ( email )

Eerikinkatu 28
00180 Helsinki
Finland

Ilja Kristian Kavonius

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49-13448417 (Phone)

HOME PAGE: http://www.ecb.europa.eu/pub/research/authors/profiles/ilja-kristian-kavonius.en.html

Centre for Consumer Society Research, University of Helsinki ( email )

Finland

HOME PAGE: http://tuhat.helsinki.fi/portal/en/person/ikavoniu

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