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Inflation and the Saving Rate

Author

Listed:
  • Russell Davidson
  • James G. MacKinnon

Abstract

This paper provides a simple explanation for the observed positive relationship between savings rates and inflation rates in modern Western economies. We argue that this relationship arises because, in times of inflation, measured income and savings overestimate the corresponding real quantities. This explanation is compared with one recently advanced by Deaton. Both models are then estimated using American and Canadian time series data. We find that our explanation appears to be satisfactory, while Deaton's can be rejected.

Suggested Citation

  • Russell Davidson & James G. MacKinnon, 1979. "Inflation and the Saving Rate," Working Paper 351, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:351
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    Cited by:

    1. Henri-Paul Rousseau, 1983. "The Dome Syndrome: The Debt Overhanging Canadian Government and Business," Canadian Public Policy, University of Toronto Press, vol. 9(1), pages 37-52, March.

    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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