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Bench Mark Revisions and the U.S. Personal Saving Rate

Author

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  • Leonard I. Nakamura

    (Federal Reserve Bank of Phildelphia)

  • Tom Stark

Abstract

Initially published estimates of the personal saving rate from 1965 Q3 to 1999 Q2, which averaged 5.3 percent, have been revised up 2.8 percentage points to 8.1 percent, as we document. We show that much of the initial variations in personal saving rate across time was pure noise. Nominal disposable personal income has been revised upward an average of 8.3 percent: one dollar in twelve was originally missing. We use both conventional and real-time estimates of the personal saving rate to forecast real disposable income, gross domestic product, and personal consumption and show that using the personal saving rate in real-time would have almost invariably made forecasts worse. Thus while the personal saving rate may contain information about later consumption once we know the true saving rate, as Campbell (1987) and Ireland(1995) have shown, as a practical matter, noise in the U.S. personal saving rate makes it uninformative for forecasting purposes

Suggested Citation

  • Leonard I. Nakamura & Tom Stark, 2006. "Bench Mark Revisions and the U.S. Personal Saving Rate," 2006 Meeting Papers 123, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:123
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    References listed on IDEAS

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    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. S. Borağan Aruoba, 2008. "Data Revisions Are Not Well Behaved," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2‐3), pages 319-340, March.
    3. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
    4. Jonathan A. Parker, 2000. "Spendthrift in America? On Two Decades of Decline in the US Saving Rate," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 317-387, National Bureau of Economic Research, Inc.
    5. Michael J. Boskin, 2000. "Economic Measurement: Progress and Challenges," American Economic Review, American Economic Association, vol. 90(2), pages 247-252, May.
    6. Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-1273, November.
    7. Peter N. Ireland, 1995. "Using the permanent income hypothesis for forecasting," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 49-63.
    8. N. Gregory Mankiw & Matthew D. Shapiro, 1986. "News or Noise? An Analysis of GNP Revisions," NBER Working Papers 1939, National Bureau of Economic Research, Inc.
    9. Dean Croushore & Tom Stark, 2003. "A Real-Time Data Set for Macroeconomists: Does the Data Vintage Matter?," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 605-617, August.
    10. William G. Gale & John Sabelhaus, 1999. "Perspectives on the Household Saving Rate," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 181-224.
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    Cited by:

    1. Andrew Kish, 2006. "Perspectives on recent trends in consumer debt," Consumer Finance Institute discussion papers 06-05, Federal Reserve Bank of Philadelphia.
    2. Croushore, Dean & Del Monaco Santos, Pedro, 2022. "The personal saving rate: Data revisions and forecasts," Economics Letters, Elsevier, vol. 219(C).

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    More about this item

    Keywords

    Permanent Income; Saving; Real-time data;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access

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