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The Short-Run and Long-Run Determinants of Household Saving:Evidence from OECD countries

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  • Philemon Kwame Opoku

Abstract

This paper examines the relationship between interest rates and household saving rates for an uneven panel of 19 OECD countries during the period 1995 to 2018. Unlike earlier studies, it uses the pooled mean group (PMG) methodology to investigate which of the interest rate effects, income or substitution, dominates in the short run, long run, or both periods. With the baseline estimations, I find that the income effect outweighs the substitution effect in the short run, and vice versa in the long run. I also finf that inflation (both expected and actual) household wealth through housing prices, unemployment rate, current taxes on income and wealth, and general government debt have significant negative impact on household saving in the long run. Current taxes on income and wealth has a strong negative impact on household saving in the short run.

Suggested Citation

  • Philemon Kwame Opoku, 2019. "The Short-Run and Long-Run Determinants of Household Saving:Evidence from OECD countries," Working Papers REM 2019/0110, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    • Handle: RePEc:ise:remwps:wp01102019
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    References listed on IDEAS

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    More about this item

    Keywords

    household saving; interest rates; ination; taxation; unemployment rate; dynamic heterogeneous panel data model;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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