The Measurement and Behaviour of the UK Saving Ratio in the 1970s

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Abstract
The consumption function is probably the most widely researched area in macro-economics and until the early seventies it seemed to be one of the most stable relationships. However, in the 1970s there was a sharp and rapid rise in the saving ratio of the personal sector that was not predicted by existing equations. Moreover the rise in the saving ratio coincided with an increase in the rate of inflation and the conventional view had been that inflation would discourage saving. This prompted a search for theories that would explain the ‘paradox’ of saving behaviour.

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