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Household Financial Conditions

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The national income and product accounts’ measure of personal saving spiked in 2001:IIIQ because of tax rebates, then retracted in 2001:IVQ. The rate has generally been declining for more than 20 years. This may not reflect household saving behavior accurately, however, because it excludes items such as net investment in consumer durables. But the flow of funds measure, which includes these items, shows roughly the same trend. In both measures, disposable personal income removes capital gains taxes but does not include capital gains. Increased tax liability from capital gains reduces disposable personal income, lowering the saving rate. To the extent that capital gains finance additional consumption, they increase the saving rate’s downward bias. The ratio of gross saving to GNP, which is invariant to how saving is allocated between the household, government, and business sectors, rose during much of the 1990s and declined in recent years.


Suggested citation: "Household Financial Conditions," Federal Reserve Bank of Cleveland, Economic Trends, no. 02-03, pp. 07, 03.01.2002.

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