European Parliament Library

Precautionary Savings in a Small Open Economy Revisited, Agustin Roitman

Label
Precautionary Savings in a Small Open Economy Revisited, Agustin Roitman
Language
eng
Abstract
A common assumption in standard economic models is that agents are risk-averse and prudent, and it is often argued that prudence is necessary to generate precautionary savings. This paper shows that prudence is not necessary to generate precautionary savings in small open economy models with more than two periods. A new class of preferences, which enables the isolation of the effect of risk aversion on precautionary savings, is introduced. The effects of changes in risk aversion, interest rates, and persistence and volatility of shocks on average asset holdings are qualitatively identical to the ones observed for standard constant-elasticity-of-substitution preferences. These results show that the almost universal assertion in the literature - that only prudent consumers can generate positive levels of precautionary savings - is simply incorrect
Bibliography note
Includes bibliographical references
resource.governmentPublication
international or intergovernmental publication
Literary Form
non fiction
Main title
Precautionary Savings in a Small Open Economy Revisited
Nature of contents
dictionaries
Responsibility statement
Agustin Roitman
Series statement
IMF Working Papers
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. Invariant Relative Prudence; III. Two-Period Model; A. Results; 1. Two-Period Model Parameterization; 2. Two-Period Model under No Uncertainty; 3. Two-Period Model under Uncertainty; IV. Three-Period Model; A. Results; 4. Two-Period Model Parameterization; 5. Three-Period Model under No Uncertainty; 6. Three-Period Model under Uncertainty; V. Volatility, Intertemporal Distortions, Risk Aversion, and Interest Rates; A. Volatility; 7. Endowments in Periods Two and Three; 8. Mean-Preserving SpreadB. Intertemporal Distortions9. Intertemporal Distortions under No Uncertainty; 10. Intertemporal Distortions under Uncertainty; C. Risk Aversion; 11. Risk Aversion under No Uncertainty; 12. Risk Aversion under Uncertainty; D. Interest Rates; 13. Higher Interest Rates under No Uncertainty; 14. Higher Interest Rates under Uncertainty; VI. Imprudence and Higher Savings; 15. Intertemporal Distortions and Risk Aversion under No Uncertainty; 16. Intertemporal Distortions and Risk Aversion under Uncertainty; VII. Infinite-Horizon Model; A. Equilibrium; B. Parameterization; C. Results17. Infinite-Horizon Model Parameterization18. Infinite-Horizon Model Moments.; VIII. Finite-Horizon Model; 19. Finite-Horizon Model Parameterization; 20. Forty-Period Model with Low Volatility; 21. Forty-Period Model with High Volatility; 22. Two-Hundred-Period Model with High Volatility; 23. Two-Hundred-Period Model with High Volatility; IX. Conclusion; Relative Prudence and Relative Risk Aversion; Relative Prudence and Relative Risk Aversion; References; References; Footnotes
Classification
Content
Other version