Frugality; Are We Fretting too Much? Household Saving and Assets in the United States
Household savings rates in the United States have recently crept up from all-time lows. Some have suggested that a shift toward frugality will hamper GDP growth-the Keynesian "paradox of thrift." We estimate that households compensate for a fall in their asset income by saving more out of their labor income, dollar-for-dollar. In the wake of the crisis, our model predicts that such primary savings will increase, but only temporarily and modestly, as household assets stabilize. As savings flows gradually accumulate, they help rebuild corporate net worth and hence firms' capacity to make capital investments. A timely return to pre-crisis levels of capital investment would require that U.S. households save substantially more than the model predicts, starting now. Hence, we should fret that our savings rates may be too low.
|Date of creation:||01 Sep 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999.
"The financial accelerator in a quantitative business cycle framework,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393
- Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers 98-03, C.V. Starr Center for Applied Economics, New York University.
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
- E. Telatar & N. Bolatoglu & F. Telatar, 2004. "A new approach on testing the behaviour of the governments towards sustainability of fiscal policy in a small-open and politically instable economy," Applied Economics Letters, Taylor & Francis Journals, vol. 11(5), pages 333-336.
- Eugene F. Fama, 2002.
"Testing Trade-Off and Pecking Order Predictions About Dividends and Debt,"
Review of Financial Studies,
Society for Financial Studies, vol. 15(1), pages 1-33, March.
- Eugene F. Fama & Kenneth R. French, . "Testing Tradeoff and Pecking Order Predictions about Dividends and Debt.”," CRSP working papers 506, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Ahmed, S. & Rogers, J.H., 1993.
"Government Budget Deficits and Trade Deficits: Are Present Value Constraints Satisfied in Long-Term Data?,"
5-93-6, Pennsylvania State - Department of Economics.
- Ahmed, Shaghil & Rogers, John H., 1995. "Government budget deficits and trade deficits Are present value constraints satisfied in long-term data?," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 351-374, November.
- Shaghil Ahmed & John H. Rogers, 1995. "Government budget deficits and trade deficits: are present value constraints satisfied in long-term data?," International Finance Discussion Papers 494, Board of Governors of the Federal Reserve System (U.S.).
- Evan Tanner, 1997. "Shifts in US savings: long-run asset accumulation versus consumption smoothing," Applied Economics, Taylor & Francis Journals, vol. 29(8), pages 989-999.
- Tanner, Evan & Liu, Peter, 1994. "Is the Budget Deficit "Too Large"?: Some Further Evidence," Economic Inquiry, Western Economic Association International, vol. 32(3), pages 511-18, July.
- Carl E. Walsh & Bharat Trehan, 1988.
"Seigniorage and tax smoothing in the United States: 1914-1986,"
Working Papers in Applied Economic Theory
88-05, Federal Reserve Bank of San Francisco.
- Trehan, Bharat & Walsh, Carl E., 1990. "Seigniorage and tax smoothing in the United States 1914-1986," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 97-112, January.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Martin Feldstein & Charles Horioka, 1979.
"Domestic Savings and International Capital Flows,"
NBER Working Papers
0310, National Bureau of Economic Research, Inc.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Martin Lettau & Sydney Ludvigson, 2003.
"Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption,"
NBER Working Papers
9848, National Bureau of Economic Research, Inc.
- Martin Lettau & Sydney C. Ludvigson, 2004. "Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption," American Economic Review, American Economic Association, vol. 94(1), pages 276-299, March.
- Quintos, Carmela E, 1995. "Sustainability of the Deficit Process with Structural Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 409-17, October.
- Tanner, Evan, 1995. "Intertemporal solvency and indexed debt: evidence from Brazil, 1976-1991," Journal of International Money and Finance, Elsevier, vol. 14(4), pages 549-573, August.
- Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
- Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
- Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988.
"Financing Constraints and Corporate Investment,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
- Jeremy Rudd & Karl Whelan, 2006. "Empirical Proxies for the Consumption-Wealth Ratio," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 34-51, January.
- Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 97-125, February.
- Giancarlo Corsetti & Nouriel Roubini, 1991.
"Fiscal Deficits, Public Debt and Government Solvency: Evidence from OECD Countries,"
NBER Working Papers
3658, National Bureau of Economic Research, Inc.
- Corsetti, Giancarlo & Roubini, Nouriel, 1991. "Fiscal deficits, public debt, and government solvency: Evidence from OECD countries," Journal of the Japanese and International Economies, Elsevier, vol. 5(4), pages 354-380, December.
- Bharat Trehan & Carl E. Walsh, 1988.
"Testing intertemporal budget constraints: theory and applications to U. S. federal budget and current account deficits,"
Working Papers in Applied Economic Theory
88-03, Federal Reserve Bank of San Francisco.
- Trehan, Bharat & Walsh, Carl E, 1991. "Testing Intertemporal Budget Constraints: Theory and Applications to U.S. Federal Budget and Current Account Deficits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 206-23, May.
- Bai, Jushan & Lumsdaine, Robin L & Stock, James H, 1998.
"Testing for and Dating Common Breaks in Multivariate Time Series,"
Review of Economic Studies,
Wiley Blackwell, vol. 65(3), pages 395-432, July.
- Tom Doan, . "RATS program to demonstrate Bai, Lumsdaine, Stock common breaks in VAR," Statistical Software Components RTZ00171, Boston College Department of Economics.
- Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
- Hakkio, Craig S & Rush, Mark, 1991. "Is the Budget Deficit "Too Large?"," Economic Inquiry, Western Economic Association International, vol. 29(3), pages 429-45, July.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:09/197. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.