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Uncertainty and consumption: new evidence in OECD countries

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  • M. Menegatti

Abstract

This work analyses the empirical evidence about precautionary saving in OECD countries in the period 1955–2000. Unlike the previous literature, we perform the test using a measure of uncertainty allowing for heterogeneity in stochastic processes which generate data for each country and selecting for each economy the autoregressive moving average process which best describes the series. The results obtained support the main conclusion of precautionary saving theory, showing that a greater degree of uncertainty increases saving. A less clear conclusion is obtained with reference to the effect of uncertainty on consumption growth, which does not seem to be strongly supported by the data.
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Suggested Citation

  • M. Menegatti, 2006. "Uncertainty and consumption: new evidence in OECD countries," Economics Department Working Papers 2006-EP08, Department of Economics, Parma University (Italy).
    • Handle: RePEc:par:dipeco:2006-ep08
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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. Bande, Roberto & Riveiro, Dolores & Ruiz, Freddy, 2021. "Does Uncertainty Affect Saving Decisions of Colombian Households? Evidence on Precautionary Saving," MPRA Paper 106771, University Library of Munich, Germany.
    3. Eleni Zafeiriou & Constantinos Katrakilidis & Chrysanthi Pegiou, 2019. "Consumer Confidence on Heating Oil Prices: An Empirical Study of their Relationship for European Union in a Nonlinear Framework," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 63-90.
    4. Garz, Marcel, 2014. "Consumption, labor income uncertainty, and economic news coverage," MPRA Paper 56076, University Library of Munich, Germany.
    5. Baiardi, Donatella & Manera, Matteo & Menegatti, Mario, 2013. "Consumption and precautionary saving: An empirical analysis under both financial and environmental risks," Economic Modelling, Elsevier, vol. 30(C), pages 157-166.
    6. Alba Lugilde & Roberto Bande & Dolores Riveiro, 2018. "Precautionary saving in Spain during the great recession: evidence from a panel of uncertainty indicators," Review of Economics of the Household, Springer, vol. 16(4), pages 1151-1179, December.
    7. Roberto BANDE & Dolores RIVEIRO, 2013. "The Consumption-Investment-Unemployment Relationship In Spain: An Analysis With Regional Data," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 4(1), pages 5-24.
    8. Ruiz, Freddy & Lugilde, Alba, 2019. "Decent work and the effect of job instability on consumption of Colombian households," MPRA Paper 92717, University Library of Munich, Germany.
    9. Mohsen Bahmani-Oskooee & Majid Maki Nayeri, 2020. "Policy uncertainty and consumption in G7 countries: An asymmetry analysis," International Economics, CEPII research center, issue 163, pages 101-113.
    10. Baiardi, Donatella & Manera, Matteo & Menegatti, Mario, 2014. "The Effects of Environmental Risk on Consumption: an Empirical Analysis on the Mediterranean Countries," Energy: Resources and Markets 172443, Fondazione Eni Enrico Mattei (FEEM).
    11. Lugilde, Alba & Bande, Roberto & Riveiro, Dolores, 2017. "Precautionary Saving: a review of the theory and the evidence," MPRA Paper 77511, University Library of Munich, Germany.
    12. Fábio Gomes & Lourenço Paz, 2015. "Large estimates of the elasticity of intertemporal substitution: is it the aggregate return series or the instrument list?," Economics Bulletin, AccessEcon, vol. 35(1), pages 168-181.
    13. Dirks, Maximilian & Schmidt, Torsten, 2023. "The relationship between political instability and economic growth in advanced economies: Empirical evidence from a panel VAR and a dynamic panel FE-IV analysis," Ruhr Economic Papers 1000, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    14. Massil, Joseph Keneck & Tadadjeu, Sosson & Yogo, Urbain Thierry, 2025. "Uncertainty and household consumption in developing countries," Structural Change and Economic Dynamics, Elsevier, vol. 73(C), pages 51-64.
    15. Dirks, Maximilian W. & Schmidt, Torsten, 2024. "Political instability and economic growth: Causation and transmission," European Journal of Political Economy, Elsevier, vol. 85(C).

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