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Durable Goods and Household Saving Ratios in the Euro Area

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  • Jalava, Jukka
  • Kavonius, Ilja Kristian

Abstract

The purpose of this paper is to estimate the impact of capitalising durable goods on the Euro area (EA) countries' and the EA-aggregate's household saving ratios and disposable incomes. 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; a much discussed topic in previous years. For instance, the U.S. Federal Reserve Board publishes two separate household net saving measures. The difference between these saving ratios is that one is derived by treating expenditure on consumer durables as investments while the other one is compiled by considering them to be household final consumption expenditure as is the present convention. We find that the effect of capitalising consumer durables on EA saving ratios is significant although the impact is lower than it is in the US.

Suggested Citation

  • Jalava, Jukka & Kavonius, Ilja Kristian, 2006. "Durable Goods and Household Saving Ratios in the Euro Area," Discussion Papers 409, VATT Institute for Economic Research.
    • Handle: RePEc:fer:dpaper:409
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