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Household Saving and Asset Valuations in Selected Industrialised Countries

  • Paul Hiebert

    (European Central Bank)

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    Over the past decade, a fairly synchronised and steady decline in household saving rates has been witnessed in some OECD countries but not in others. In these English-speaking countries, which share many similar institutional and cultural features, declines in household or personal saving appear to have been correlated with large capital gains and rapid financial innovation. An empirical investigation based on quarterly macroeconomic data indicates that gains in the valuation of asset holdings have indeed been important as a substitute for traditional household saving (that is, personal saving as defined in the national accounts) in these countries over the last decades, and in some cases that this effect has been intensifying through time. Existing studies analysing private saving have tended to either focus on individual countries, finding the importance of wealth effects in certain cases, or a panel of OECD countries in which other common factors tend to dominate the wealth effect. In the latter case, it is possible that the lack of a significant wealth effect could be attributable to heterogeneity across countries.

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    File URL: http://www.rba.gov.au/publications/rdp/2006/pdf/rdp2006-07.pdf
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    Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2006-07.

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    Date of creation: Aug 2006
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    Handle: RePEc:rba:rbardp:rdp2006-07
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    1. Guy Debelle, 2004. "Macroeconomic implications of rising household debt," BIS Working Papers 153, Bank for International Settlements.
    2. F. Thomas Juster & Joseph P. Lupton & James P. Smith & Frank Stafford, 2006. "The Decline in Household Saving and the Wealth Effect," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 20-27, February.
    3. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 1999. "What Drives Private Saving Across the World?," Working Papers Central Bank of Chile 47, Central Bank of Chile.
    4. Nelson C. Mark & Donggyu Sul, 2002. "Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand," NBER Technical Working Papers 0287, National Bureau of Economic Research, Inc.
    5. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
    6. 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.
    7. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2000. "Do the Rich Save More?," NBER Working Papers 7906, National Bureau of Economic Research, Inc.
    8. Tim Callen & Christian Thimann, 1997. "Empirical Determinants of Household Saving; Evidence From OECD Countries," IMF Working Papers 97/181, International Monetary Fund.
    9. Florian Pelgrin & Alain de Serres, 2003. "The Decline in Private Saving Rates in the 1990s in OECD Countries: How Much Can Be Explained by Non-wealth Determinants?," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 117-153.
    10. William G. Gale & John Sabelhaus, 1999. "Perspectives on the Household Saving Rate," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 181-224.
    11. Sarantis, Nicholas & Stewart, Chris, 2001. "Saving Behaviour in OECD Countries: Evidence from Panel Cointegration Tests," Manchester School, University of Manchester, vol. 69(0), pages 22-41, Supplemen.
    12. Filippo Altissimo & Evaggelia Georgiou & Teresa Sastre & Maria Teresa Valderrama & Gabriel Sterne & Marc Stocker & Mark Weth & Karl Whelan & Alpo Willman, 2005. "Wealth and asset price effects on economic activity," Occasional Paper Series 29, European Central Bank.
    13. Ellis Connolly & Marion Kohler, 2004. "The Impact of Superannuation on Household Saving," RBA Research Discussion Papers rdp2004-01, Reserve Bank of Australia.
    14. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, June.
    15. Jonathan A. Parker, 1999. "Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate," NBER Working Papers 7238, National Bureau of Economic Research, Inc.
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