Revision:Access to credit / Financial Deregulation

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Financial liberalisation of financial and capital markets in 1980s. E.g. relaxation of controls on mortgage lending, and deregulation to enable consumers to gain easier access to credit markets – UK a credit liberalised country. This has boosted spending, esp. on consumer durables which are credit financed, such as cars & household electrical goods.

The Savings Ratio

Definition: The difference between personal disposable income (PDI) and consumption, expressed as a percentage of PDI.

There are several practical and conceptual problems, for example:

• It is the difference between 2 large and fairly inaccurate aggregates so it is inevitably inaccurate itself (up to 20% either way says gov).
• Personal Sector: households, unincorporated businesses, non-profit bodies and life assurance and pension funds and will therefore be affected by stock appreciation
• Largely unanticipated swings in savings over the past 20 years imply that consumption function less stable than Keynes thought.

85-88: consumption consistently underestimated.

89-92: consumption consistently overestimated due to policy errors, welfare losses

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