The financial behaviour of the UK personal sector, 1976-85

Quarterly Bulletin 1987 Q2
Published on 01 June 1987

The financial behaviour of the personal sector has important implications both for the real economy and for monetary policy. For example, movements in wealth influence households' consumption and saving decisions, which, in turn, affect aggregate demand. Moreover, the demand for money, the stability of which is a central issue in implementing monetary policy, is an integral part of the portfolio allocation decision between liquid and illiquid assets .

This article examines developments in the financial behaviour of the personal sector over the period 1976-85, considering the various factors which have been important in shaping the sector's balance sheet and in changing its composition over time. The issue of whether or not the strong growth in the value of personal sector holdings in the life assurance and pension funds (LAPFs) has influenced households' behaviour is also discussed. Finally, the article considers some implications of developments within the balance sheet, with particular regard to the build-up of personal sector debt and the possibly growing interest rate sensitivity of the personal sector's financial behaviour.

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The financial behaviour of the UK personal sector, 1976-85

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