Household Savings Decision and Income Uncertainty
This paper empirically investigates the effects of changes in the interest rate as well as transitory income uncertainty on households' consumption-savings decision. Applying a structural demand model to German survey data, we estimate the uncompensated interest rate elasticity for savings, in line with the literature, to around zero. Accordingly, any policy-induced variation of net returns to savings is expected to have no significant effects on the level of savings. Moreover, we find significant effects of precautionary savings on the consumption-savings decision. As a result of a doubling of transitory income uncertainty, an average household increases savings by 4:4%. These effects vary by household composition and social status.
|Date of creation:||2010|
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- Axel Borsch-Supan & Lothar Essig, 2003. "Household Saving in Germany: Results of the first SAVE study," NBER Working Papers 9902, National Bureau of Economic Research, Inc.
- Masao Ogaki & Jonathan D. Ostry & Carmen M. Reinhart, 1996.
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Palgrave Macmillan, vol. 43(1), pages 38-71, March.
- Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1995. "Saving behavior in low- and middle-income developing countries," MPRA Paper 13757, University Library of Munich, Germany.
- Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," MPRA Paper 6978, University Library of Munich, Germany.
- Schmidt-Hebbel, Klaus & Webb, Steven B. & Corsetti, Giancarlo, 1991.
"Household saving in developing countries : first cross-country evidence,"
Policy Research Working Paper Series
575, The World Bank.
- Schmidt-Hebbel, Klaus & Webb, Steven B & Corsetti, Giancarlo, 1992. "Household Saving in Developing Countries: First Cross-Country Evidence," World Bank Economic Review, World Bank Group, vol. 6(3), pages 529-47, September.
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