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Consumption and uncertainty: a panel analysis in Italian Regions

  • Mario Menegatti

This work tests precautionary saving theory in Italian regions, examining the relationship between consumption growth and income uncertainty in a panel of five-year averages in the period 1981 to 2000. The analysis used two different measures for income uncertainty. The first is a naive measure given by the variance of GDP growth rates while the second is a more sophisticated one obtained by computing the conditional variance by means of the expectation of GDP growth. This expectation is obtained by using the best ARMA process for each region. The results obtained confirm the importance of the precautionary saving motive in consumption decisions.

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Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 14 (2007)
Issue (Month): 1 ()
Pages: 39-42

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Handle: RePEc:taf:apeclt:v:14:y:2007:i:1:p:39-42
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  1. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings uncertainty and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 307-337, November.
  2. 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, 07.
  3. Dynan, Karen E, 1993. "How Prudent Are Consumers?," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1104-13, December.
  4. Antonello Scorcu, 1998. "Consumption risk-sharing in Italy," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 407-414.
  5. Johan Lyhagen, 2001. "The effect of precautionary saving on consumption in Sweden," Applied Economics, Taylor & Francis Journals, vol. 33(5), pages 673-681.
  6. 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.).
  7. Steigerwald, Doug, 1997. "Consumption Adjustment under Changing Income Uncertainty," University of California at Santa Barbara, Economics Working Paper Series qt5kp8k6xc, Department of Economics, UC Santa Barbara.
  8. Lyhagen, Johan, 1997. "The Effect of Precautionary Saving on Consumption in Sweden," Working Paper 58, National Institute of Economic Research.
  9. Menegatti, Mario, 2001. "On the Conditions for Precautionary Saving," Journal of Economic Theory, Elsevier, vol. 98(1), pages 189-193, May.
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