European Parliament Library

Precautionary Savings in the Great Recession, Ashoka Mody, Damiano Sandri, Franziska Ohnsorge

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, 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
Table Of Contents
Cover; Contents; I. Introduction; Figures; Figure 1. Consensus forecasts for 2009 real GDP growth; Figure 2. Change in real private consumption growth and household saving rates, 2007-09; II. A Model of Precautionary Savings; Figure 3. Higher unemployment risk increases the saving rate; Figure 4. The saving rate is little influenced by changes in investment risk; Figure 5. The saving rate increases after wealth losses; III. Econometric Approach; IV. Savings and Uncertainty; Tables; Table 1. Saving rates and unemployment risk
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (39 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781463942380

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