Advanced Search
MyIDEAS: Login

Determinants of Precautionary Savings : Elasticity of Intertemporal Substitution vs. Risk Aversion

Contents:

Author Info

  • Arif Oduncu

Abstract

The purpose of this paper is to understand the effects of the elasticity of intertemporal substitution (EIS) and risk aversion on savings separately and determine which coefficient is more important factor for precautionary savings. This is an important question since a significant fraction of the capital accumulation is due to precautionary savings according to literature. Thus, knowing the important determinant of precautionary savings will be helpful to understand the capital accumulation mechanism. This paper uses an Epstein-Zin utility function, which permits risk attitudes to be disentangled from the degree of intertemporal substitutability, in the model in order to study the effects of EIS and risk aversion separately. It is shown that saving increases as EIS increases. Similarly, saving increases as the coefficient of risk aversion increases. More importantly, it is observed that EIS is a more important factor for precautionary savings than risk aversion because saving is more responsive to changes in EIS than changes in risk aversion.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.tcmb.gov.tr/research/teblig/abstract/wp1227_tr.php
Download Restriction: no

Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1227.

as in new window
Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:tcb:wpaper:1227

Contact details of provider:
Postal: Head Office, Istiklal Cad. 10 Ulus, 06100 Ankara
Phone: (90 312) 507 5000
Fax: (90 312) 507 5640
Email:
Web page: http://www.tcmb.gov.tr
More information through EDIRC

Related research

Keywords: Precautionary Savings; Epstein-Zin Utility; Risk Aversion; Elasticity of Intertemporal Substitution;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:tcb:wpaper:1227. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gulhanim Kayatas).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.