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Cyclical precautionary saving and monetary policy


  • Bianca De Paoli
  • Pawel Zabczyk


Some estimates suggest that precautionary saving may account for more than 40% of all wealth accumulation. The strength of the underlying precautionary motives is arguably closely related to risk aversion and as such is likely to fluctuate over the business cycle. In this article we study the implications of these cyclical swings in risk aversion and precautionary saving for the optimal conduct of monetary policy. JEL Classification: E32, G12

Suggested Citation

  • Bianca De Paoli & Pawel Zabczyk, 2012. "Cyclical precautionary saving and monetary policy," Research Bulletin, European Central Bank, vol. 16, pages 7-9.
  • Handle: RePEc:ecb:ecbrbu:2012:0016:2

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    References listed on IDEAS

    1. Christopher Carroll & Martin Sommer & Jiri Slacalek, 2012. "Dissecting Saving Dynamics; Measuring Wealth, Precautionary, and Credit Effects," IMF Working Papers 12/219, International Monetary Fund.
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    Cited by:

    1. Bingbing Dong, 2014. "Asset Pricing and Monetary Policy," 2014 Meeting Papers 881, Society for Economic Dynamics.

    More about this item


    precautionary saving; monetary policy;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates


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