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Dissecting saving dynamics: Measuring wealth, precautionary, and credit effects

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  • Carroll, Christopher D.
  • Slacalek, Jiri
  • Sommer, Martin

Abstract

We argue that the US personal saving rate's long stability (1960s-1980s), subsequent steady decline (1980s-2007), and recent substantial rise (2008-2011) can be interpreted using a parsimonious buffer stock model of consumption in the presence of labor income uncertainty and credit constraints. Saving in the model is affected by the gap between target and actual wealth, with the target determined by credit conditions and uncertainty. An estimated structural version of the model suggests that increased credit availability accounts for most of the long-term saving decline, while fluctuations in wealth and uncertainty capture the bulk of the business-cycle variation. --

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Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2012/10.

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Date of creation: 2012
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Handle: RePEc:zbw:cfswop:201210

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Keywords: Consumption; Saving; Wealth; Credit; Uncertainty;

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Cited by:
  1. Daniel Cooper & Karen Dynan, 2013. "Wealth shocks and macroeconomic dynamics," Public Policy Discussion Paper, Federal Reserve Bank of Boston 13-4, Federal Reserve Bank of Boston.
  2. Sule Alan & Thomas Crossley & Hamish Low, 2012. "Saving on a Rainy Day, Borrowing for a Rainy Day," Koç University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum 1212, Koc University-TUSIAD Economic Research Forum.
  3. Carroll, Christopher D., 2014. "Representing consumption and saving without a representative consumer," CFS Working Paper Series 464, Center for Financial Studies (CFS).
  4. Burgess, Stephen & Fernandez-Corugedo, Emilio & Groth, Charlotta & Harrison, Richard & Monti, Francesca & Theodoridis, Konstantinos & Waldron, Matt, 2013. "The Bank of England's forecasting platform: COMPASS, MAPS, EASE and the suite of models," Bank of England working papers, Bank of England 471, Bank of England.
  5. Daniel Garrote & Jimena Llopis & Javier Vallés, 2013. "Los canales del desapalancamiento del sector privado: una comparación internacional," Banco de Espa�a Occasional Papers 1302, Banco de Espa�a.
  6. Gatt, William, 2014. "The determinants of household saving behaviour in Malta," MPRA Paper 57707, University Library of Munich, Germany.

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