Net liquid assets and net illiquid assets in the consumption function: Some evidence for the United Kingdom

This note reports details of estimating consumption equations for the United Kingdom which separate net wealth into net liquid assets and net illiquid assets. The estimation framework is related to that in the influential article by Hendry and von Ungern-Sternberg (1981), but recognises the importance of defining income to allow not only for inflation induced losses but also for depreciation provisions. The empirical results provide some support for a role for both liquid and illiquid assets in determining consumption decisions.