Abstract
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, the paper finds 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. The 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.
Original language | English (US) |
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Pages (from-to) | 114-138 |
Number of pages | 25 |
Journal | IMF Economic Review |
Volume | 60 |
Issue number | 1 |
DOIs | |
State | Published - Apr 2012 |
Externally published | Yes |
All Science Journal Classification (ASJC) codes
- General Economics, Econometrics and Finance
- General Business, Management and Accounting