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Saving Behaviour and the Effectiveness of Fiscal Policy

  • Luiz de Mello
  • Per Mathis Kongsrud
  • Robert W.R. Price

This paper examines the extent to which fiscal policy actions may be offset by simultaneous, anticipatory changes in private saving, as well as the determinants of that offset. The conditions under which private agents will engage in forward-looking consumption-smoothing behaviour are quite strict and unlikely to hold fully in practice. However, based on a sample of at most 21 OECD countries spanning the period 1970-2002, there is strong evidence of partial, yet substantial, offsetting movements in aggregate private and public saving. The overall offset is estimated at between about one-third and one-half, depending on model specification, and applies both to public consumption and revenue shifts. This is consistent with a marked degree of anticipatory private sector behaviour, insofar as the ex ante saving “leakage” embedded in the pure Keynesian or IS/LM type models would be expected to be smaller and apply only to revenues and transfers. Wealth effects, as in the case of rising equity and housing prices, are found to have an important complementary impact on saving, usually in reinforcing the direct saving offset. Initial conditions, as reflected in debt/GDP ratios are also found to influence the size of the offset. Comportement d'économie et l'efficacité de la politique fiscale Cet article examine dans quelle mesure la politique budgétaire discrétionnaire peut être compensée par des mouvements simultanés et anticipés de l’épargne privée. Il étudie aussi les déterminants de cette compensation. Les conditions sous lesquelles les agents économiques privés lisseraient leur consommation dans le temps apparaissent difficilement applicables en pratique. Cependant, sur la base d’un échantillon d’au plus 21 pays de l’OCDE couvrant la période allant de 1970 à 2002, les résultats de cette étude indiquent une compensation partielle, bien que substantielle, des mouvements de l’épargne privée et publique agrégées. L’estimation de la compensation globale varie entre un tiers et un demi selon la spécification du modèle et s’applique tant à la consommation publique qu’aux recettes. Ce résultat est compatible avec un comportement d’anticipation très accusé de l’épargne privée dans la mesure où les fuites ex ante d’épargne incorporées dans les modèles Keynésiens purs ou du type IS/LM sont supposées plus faibles et ne s’appliqueraient qu’aux recettes et aux transferts. Les résultats indiquent que les effets de richesse, provenant de l’augmentation des prix des actions et des logements, ont une incidence complémentaire importante sur l’épargne. Les conditions initiales, reflétées par le ratio dette sur PIB, affectent la taille de la compensation.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 397.

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Date of creation: 13 Jul 2004
Date of revision:
Handle: RePEc:oec:ecoaaa:397-en
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