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The Effects of Consumption Variability on Saving: Evidence from a Panel of Muscovite Households

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  • Alessandra Guariglia
  • Byung-Yeon Kim

Abstract

Due to the high uncertainty characterizing them, transition economies provide an extraordinary opportunity to test the precautionary saving hypothesis. This paper represents an attempt to exploit this opportunity. We use a panel of 2,346 Muscovite households, over the 12 months of 1996, to construct two time-varying measures of consumption growth variability, which we use as proxies for households' perceived uncertainty. We then regress household saving on these uncertainty variables using a GMM-system estimator. We find that both uncertainty measures generally have a positive and statistically significant effect on saving. This result, which is robust to the use of different measures of saving, supports the precautionary saving hypothesis. Copyright 2003 Blackwell Publishing Ltd.

Suggested Citation

  • Alessandra Guariglia & Byung-Yeon Kim, 2003. "The Effects of Consumption Variability on Saving: Evidence from a Panel of Muscovite Households," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(3), pages 357-377, July.
  • Handle: RePEc:bla:obuest:v:65:y:2003:i:3:p:357-377
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    References listed on IDEAS

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    1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, pages 1057-1072.
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    Cited by:

    1. Bande, Roberto & Riveiro, Dolores, 2012. "The Consumption-Investment-Unemployment Relationship in Spain: an Analysis with Regional Data," MPRA Paper 42681, University Library of Munich, Germany.
    2. Roberto Bande & Dolores Riveiro, 2013. "Private Saving Rates and Macroeconomic Uncertainty: Evidence from Spanish Regional Data," The Economic and Social Review, Economic and Social Studies, pages 323-349.
    3. Donatella Baiardi & Matteo Manera & Mario Menegatti, 2014. "The Effects of Environmental Risk on Consumption: an Empirical Analysis on the Mediterranean Countries," Working Papers 271, University of Milano-Bicocca, Department of Economics, revised Apr 2014.
    4. Lugilde, Alba & Bande, Roberto & Riveiro, Dolores, 2016. "Precautionary saving in Spain during the Great Recession: evidence from a panel of uncertainty indicators," MPRA Paper 72436, University Library of Munich, Germany.
    5. Guariglia, Alessandra & Rossi, Mariacristina, 2004. "Private medical insurance and saving: evidence from the British Household Panel Survey," Journal of Health Economics, Elsevier, pages 761-783.
    6. Lugilde, Alba & Bande, Roberto & Riveiro, Dolores, 2017. "Precautionary Saving: a review of the theory and the evidence," MPRA Paper 77511, University Library of Munich, Germany.
    7. Shida, Yoshisada, 2015. "Forced Savings in the Soviet Republics: Re-examination," RRC Working Paper Series 54, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
    8. Baiardi, Donatella & Manera, Matteo & Menegatti, Mario, 2013. "Consumption and precautionary saving: An empirical analysis under both financial and environmental risks," Economic Modelling, Elsevier, pages 157-166.
    9. Mario Menegatti, 2007. "Consumption and uncertainty: a panel analysis in Italian Regions," Applied Economics Letters, Taylor & Francis Journals, pages 39-42.
    10. Sayema H. Bidisha, "undated". "Saving Behaviour of the Immigrants and Ethnic Minorities in the UK: Evidence from Panel Data," Discussion Papers 08/08, University of Nottingham, School of Economics.

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