orazio p. attanasio and guglielmo weber ( 2010 ), “ consumption and saving : models of intertemporal allocation and their implications for public policy, ” journal of economic literature, vol. 48 ( september ), pp. 693 – 751. bis central bankers ’ speeches that variation on aggregate consumption – and, ultimately, growth – requires more exploration. 3 but since household behavior is surely driven by more than the size of the paycheck coming in the proverbial front door, the distribution of wealth – as distinct from the distribution of income – could have clearer implications for the macroeconomy. indeed, wealth inequality is greater than income inequality in the united states, although it has widened little in recent decades. for example, according to the survey of consumer finances ( scf ), a survey conducted every three years by the federal reserve board, the top one - fifth of families ranked by income owned 72 percent of the total wealth in the economy in 2010, whereas families in the bottom one - fifth of the income distribution together owned only 3 percent of total wealth in 2010. 4 hence, families with more - modest incomes have much less wealth to cushion themselves against income shocks, such as unemployment. for example, in 2010, the median value of financial assets was less than $ 1, 000 for families in the lowest income quintile. moreover, what wealth low - and middle - income families do have is typically concentrated in housing. for families in the top quintile of income, the value of residential properties accounted for about 15 percent of total wealth in 2010. for families in the middle and lower half of the income distribution, the ratio of their home values to total net worth was near 70 percent. in contrast, stock market wealth ( and the value of other securities ) constitutes a very small share of wealth for low - and middle - income families. because the wealth of people at the lower end of the distribution is concentrated in housing, these households are disproportionately exposed to swings in house prices. this compositional effect was intensified during the housing boom, as the share of wealth accounted for by housing grew even faster for low - and middle - income families than for highincome families. that said, the increases in homeownership and house values during the boom were largely financed by rising mortgage debt. thus, the direct positive effect of rising house prices on most households ’ net worth was largely offset by the

##t. in light of the moderate upward trend in underlying inflation, the bank continued to restrain the growth rate of commercial bank credit to the private sector. after an adjustment to take account of the extension and subsequent early repayment of loans by certain large borrowers, using offshore funds, credit rose by 21. 4 percent over the year, compared to 18. 1 percent in 2001. this growth rate was well above the bank ’ s target range of 12. 5 - 14. 5 percent, which had been judged to be consistent with the economy ’ s underlying growth potential and the inflation objective. moreover, the high rate of growth of government spending, estimated at 18 percent during 2002, albeit below the 20 percent growth rate recorded in 2001, also continued to exert pressure on inflation, thereby placing a heavier burden on monetary policy. the expansionary fiscal policy implied an undesirable imbalance between fiscal and monetary policies in dealing with inflation. monetary policy implementation during 2002 in light of the high growth rate of credit and the need to contain inflationary expectations following the introduction of vat, the bank tightened monetary policy towards the end of the year by raising interest rates by a total of 1 percent in october and november 2002 - half a percent at each time. consistent with past practice, the two changes in interest rates were immediately followed by press releases, which emphasised that the increase in interest rates was not a response to the rise in inflation resulting from the introduction of vat, because the bank considers the vat - induced impact on inflation as a transitory event, which did not directly justify a monetary policy response. the bank ’ s focus was on the impact that vat may have on inflationary expectations. hence it was important to forestall the development of expectations of higher inflation by pointing out the dangers of accommodating second - round effects of vat - related price increases and advising against possible compensatory wage increases. higher interest rates were, therefore, aimed partly at ensuring that such expectations do not develop. this was done in order to demonstrate the bank ’ s commitment to containing inflation arising from any temporary vat - related price increases, and in order that expectations of rising prices do not become entrenched. there was also a need for a tighter monetary policy given that credit growth was still higher than desired. the effect of the exchange rate on inflation was benign during 2002. while the pula appreciated in nominal terms against major international currencies, it depreciated