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Saving and the long shadow of macroeconomic shocks

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  • Aizenman, Joshua
  • Noy, Ilan

Abstract

The global crisis of 2008 raises many questions regarding the long-term response to crises. We know that households that lost access to credit, for example, were forced to adjust and increase saving. But, will households keep on saving more than they would have done otherwise had the global financial crisis not occurred? And for how long will this increased saving persist? Here, we study the degree to which past adverse income shocks increase the saving rates of affected households. We find evidence consistent with history-dependent dynamics: more experience of past crises tends to increase household saving. We follow up with an investigation of the importance of historical exposure for current account dynamics, but find no strong indication that our measure of past exposure is important to the current account's determination. We conclude by estimating the likely impact of the 2008 GFC on future saving.

Suggested Citation

  • Aizenman, Joshua & Noy, Ilan, 2015. "Saving and the long shadow of macroeconomic shocks," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 147-159.
  • Handle: RePEc:eee:jmacro:v:46:y:2015:i:c:p:147-159
    DOI: 10.1016/j.jmacro.2015.08.007
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    Cited by:

    1. Diana De Alwis & Ilan Noy, 2019. "Sri Lankan households a decade after the Indian Ocean tsunami," Review of Development Economics, Wiley Blackwell, vol. 23(2), pages 1000-1026, May.
    2. Aleksandra Kolasa & Barbara Liberda, 2014. "Determinants of saving in Poland: Are they different than in other OECD countries?," Working Papers 2014-13, Faculty of Economic Sciences, University of Warsaw.

    More about this item

    Keywords

    Saving; Household saving; Shocks; Rare disasters;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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