Private Saving Rates and Macroeconomic Uncertainty: Evidence from Spanish Regional Data

In this paper we address the recent evolution of saving rates in the Spanish economy using regional data. The onset of the Great Recession has been followed by increasing saving rates, which may reflect precautionary behaviour of households. Thus, we test precautionary saving theory for a panel of Spanish regions in the period 1980-2007, using two different tests for consumption growth and for saving rate. We estimate a panel data model with regional fixed effects and test for the effects on consumption of uncertainty about future income, proxied by income volatility and unemployment rate, together with other variables such as income growth rate, disposable income, inflation rate, wealth to income ratios, domestic private credit and socio-demographic factors. Our preliminary results suggest that part of the large increase in savings rates is related to a precautionary motive and that increased uncertainty causes greater savings rates. Our results also suggest that, in the case of the Spanish economy, the unemployment rate is a relevant variable to measure future income uncertainty.