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Stock Market Wealth, Private Saving, and the Current Account in the United States: Should We Worry?

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  • Hubert Strauß
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    Abstract

    The paper investigates by means of cointegration analysis whether the recently observed low levels of private saving and the current account balance in the United States are worrisome in the sense that they cannot be sufficiently explained by determinants which performed well in the past. Stock market wealth of private households is taken into account and turns out to be the main dampening factor of private saving during the nineties. Unlike the current account deficit, which reflects low saving, higher growth with respect to the rest of the world and the high dollar, private saving is much lower than predicted by the model in 1999.

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    File URL: http://www.ifw-members.ifw-kiel.de/publications/stock-market-wealth-private-saving-and-the-current-account-in-the-united-states-should-we-worry/kap963.pdf
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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 963.

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    Length: 36 pages
    Date of creation: Dec 1999
    Date of revision:
    Handle: RePEc:kie:kieliw:963

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    Related research

    Keywords: Private Saving; Current Account Balance; Stock Market Wealth; Cointegration;

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    References

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    1. Carsten-Patrick Meier, 1997. "Assessing convergence to purchasing power parity: A panel study for ten OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(2), pages 297-312, 06.
    2. Francois R. Velde, 1999. "Americans are not saving: should we worry?," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue May.
    3. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
    4. Bhatia, Kul B, 1972. "Capital Gains and the Aggregate Consumption Function," American Economic Review, American Economic Association, vol. 62(5), pages 866-79, December.
    5. Meier, Carsten-Patrick, 1997. "Assessing convergence to purchasing power parity : a panel study for ten OECD countries," Open Access Publications from Kiel Institute for the World Economy 1719, Kiel Institute for the World Economy (IfW).
    6. Scheide, Joachim, 1984. "Geldpolitik, Konjunktur und rationale Erwartungen," Open Access Publications from Kiel Institute for the World Economy 378, Kiel Institute for the World Economy (IfW).
    7. Peter Boswijk, H., 1994. "Testing for an unstable root in conditional and structural error correction models," Journal of Econometrics, Elsevier, vol. 63(1), pages 37-60, July.
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