Precautionary Savings in the Great Recession
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Summary:
Heightened uncertainty since the onset of the Great Recession has materially increased saving rates, contributing to lower consumption and GDP growth. Consistent with a model of precautionary savings in the face of uncertainty, we find for a panel of advanced economies that greater labor income uncertainty is significantly associated with higher household savings. These results are robust to controlling for other determinants of saving rates, including wealth-to-income ratios, the government fiscal balance, demographics, credit conditions, and global growth and financial stress. Our estimates imply that at least two-fifths of the sharp increase in household saving rates between 2007 and 2009 can be attributed to the precautionary savings motive.
Series:
Working Paper No. 2012/042
Subject:
Consumption Disposable income Income Labor National accounts Precautionary savings Unemployment rate
English
Publication Date:
February 1, 2012
ISBN/ISSN:
9781463936433/1018-5941
Stock No:
WPIEA2012042
Pages:
38
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