Consumption and Precautionary Saving: An Empirical Analysis under Both Financial and Environmental Risks
AbstractThis paper studies the empirical relationship between consumption and saving under two different sources of uncertainty: financial risk and environmental risk. The analysis is carried out using time series data for six advanced economies in the period 1965-2007. The results support the theoretical conclusions that both financial risk alone and the interaction between financial and environmental risks affect consumption. Moreover, we suggest a solution to some shortcomings which concern the empirical analysis performed with one-argument utility functions. Finally, we provide new estimates of indexes of relative risk aversion and relative prudence, and relative preference of environmental quality.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2011.62.
Date of creation: Aug 2011
Date of revision:
Consumption; Precautionary Saving; Financial Risk; Environmental Risk; Prudence; Relative Risk Aversion; Uncertainty;
Other versions of this item:
- Baiardi, Donatella & Manera, Matteo & Menegatti, Mario, 2013. "Consumption and precautionary saving: An empirical analysis under both financial and environmental risks," Economic Modelling, Elsevier, vol. 30(C), pages 157-166.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-09 (All new papers)
- NEP-ENV-2011-10-09 (Environmental Economics)
- NEP-UPT-2011-10-09 (Utility Models & Prospect Theory)
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