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The degree of precautionary saving: A reexamination

  • Lee, Jeong-Joon
  • Sawada, Yasuyuki

Extending Dynan's methodology (1993), we show that a significant frac tion of the prudence parameter puzzle can be explained by a downward omitted variable bias. Further, the estimated prudence is substantially higher for liquidity-constrained households.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4NKB1P2-4/2/1e868303cd2a330ff2af894343685910
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 96 (2007)
Issue (Month): 2 (August)
Pages: 196-201

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Handle: RePEc:eee:ecolet:v:96:y:2007:i:2:p:196-201
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Banks, James & Blundell, Richard & Brugiavini, Agar, 2001. "Risk Pooling, Precautionary Saving and Consumption Growth," Review of Economic Studies, Wiley Blackwell, vol. 68(4), pages 757-79, October.
  2. Jonathan A. Parker & Bruce Preston, 2004. "Precautionary Saving and Consumption Fluctuations," Working Papers 140, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  3. repec:att:wimass:9722 is not listed on IDEAS
  4. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
  5. Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
  6. Christopher D. Carroll, 1997. "Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)," NBER Working Papers 6298, National Bureau of Economic Research, Inc.
  7. Christopher D. Carroll & Miles S. Kimball, 2006. "Precautionary Saving and Precautionary Wealth," Economics Working Paper Archive 530, The Johns Hopkins University,Department of Economics.
  8. Merrigan, Philip & Normandin, Michel, 1996. "Precautionary Saving Motives: An Assessment from UK Time Series of Cross-Sections," Economic Journal, Royal Economic Society, vol. 106(438), pages 1193-1208, September.
  9. Dirk Krueger & Fabrizio Perri, 2005. "Does income inequality lead to consumption equality? evidence and theory," Staff Report 363, Federal Reserve Bank of Minneapolis.
  10. Orazio P. Attanasio & Hamish Low, 2004. "Estimating Euler Equations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 405-435, April.
  11. Sydney Ludvigson & Christina H. Paxson, 2001. "Approximation Bias In Linearized Euler Equations," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 242-256, May.
  12. Stephen Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 24-85, Wharton School Rodney L. White Center for Financial Research.
  13. Dynan, Karen E, 1993. "How Prudent Are Consumers?," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1104-13, December.
  14. Karen E. Dynan, 1993. "How prudent are consumers?," Working Paper Series / Economic Activity Section 135, Board of Governors of the Federal Reserve System (U.S.).
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