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What Is behind the Global Jump in Personal Saving during the Pandemic?

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Abstract

Household saving has soared in the United States and other high-income countries during the COVID-19 pandemic, despite widespread declines in wages and other private income streams. This post highlights the role of fiscal policy in driving the saving boom, through stepped-up social benefits and other income support measures. Indeed, in the United States, Japan, and Canada, government assistance has pushed household income above its pre-pandemic trajectory. We argue that the larger scale of government assistance in these countries helps explain why saving in these countries has risen more strongly than in the euro area. Going forward, how freely households spend out of their newly accumulated savings will be a key factor determining the strength of economic recoveries.

Suggested Citation

  • Matthew Higgins & Thomas Klitgaard, 2021. "What Is behind the Global Jump in Personal Saving during the Pandemic?," Liberty Street Economics 20210414, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:90854
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    Cited by:

    1. Jose Maria Barrero & Nicholas Bloom & Steven J. Davis, 2023. "Long Social Distancing," Journal of Labor Economics, University of Chicago Press, vol. 41(S1), pages 129-172.

    More about this item

    Keywords

    income; saving; fiscal policy; pandemic; COVID-19; consumption; U.S.; Euro area; Japan; Canada; transfers; wages; benefits;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • F0 - International Economics - - General

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