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The Effect of Precautionary Saving on Consumption in Sweden

Author

Listed:
  • Lyhagen, Johan

    (National Institute of Economic Research)

Abstract

Uncertainty concerning future income lowers consumption. This is often called the precautionary demand for savings. In this paper the existence of precautionary saving is investigated using Swedish data for the years 1973-1992. As there are no variables for consumers' uncertainty we use proxies. Assuming different underlying distributions of attitudinal data we have a set of variance series. Including the proxies in different specifications of the consumption function, indication of precautionary saving can be found. No uncertainty would raise consumption by 4.9%.

Suggested Citation

  • Lyhagen, Johan, 1997. "The Effect of Precautionary Saving on Consumption in Sweden," Working Papers 58, National Institute of Economic Research.
  • Handle: RePEc:hhs:nierwp:0058
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    Cited by:

    1. Roberto Bande & Dolores Riveiro, 2013. "Private Saving Rates and Macroeconomic Uncertainty: Evidence from Spanish Regional Data," The Economic and Social Review, Economic and Social Studies, vol. 44(3), pages 323-349.
    2. Phang, Sock-Yong, 2004. "House prices and aggregate consumption: do they move together? Evidence from Singapore," Journal of Housing Economics, Elsevier, vol. 13(2), pages 101-119, June.
    3. repec:kap:iaecre:v:12:y:2006:i:3:p:298-307 is not listed on IDEAS
    4. Kjellberg, David & Post, Erik, 2007. "A Critical Look at Measures of Macroeconomic Uncertainty," Working Paper Series 2007:14, Uppsala University, Department of Economics.
    5. Myung Hoon Yi & Changkyu Choi, 2006. "A GMM test of the precautionary saving hypothesis with nonexpected-utility preferences," Applied Economics, Taylor & Francis Journals, vol. 38(1), pages 71-78.
    6. Johnsson, Helena & Kaplan, Peter, 1999. "An Econometric Study of Private Consumption Expenditure in Sweden," Working Papers 70, National Institute of Economic Research.
    7. Alessandro Federici & Pierluigi Montalbano, 2012. "Macroeconomic volatility, consumption behaviour and welfare: A cross-country analysis," Working Paper Series 3612, Department of Economics, University of Sussex.
    8. Mario Menegatti, 2007. "Consumption and uncertainty: a panel analysis in Italian Regions," Applied Economics Letters, Taylor & Francis Journals, vol. 14(1), pages 39-42.
    9. Chen, Jie, 2006. "Re-evaluating the association between housing wealth and aggregate consumption: New evidence from Sweden," Journal of Housing Economics, Elsevier, vol. 15(4), pages 321-348, December.

    More about this item

    Keywords

    Precautionary saving; consumption; uncertainty; econometric modelling; cointegration.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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