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The Degree of Precautionary Saving: A Reexamination

  • Yasuyuki Sawada

    (Faculty of Economics, University of Tokyo)

  • Jeong-Joon Lee

    (Department of Economics, Towson University)

Extending Dynan's methodology (1993), we show that a significant frac tion of the prudence parameter puzzle can be explained by a downward omitted variable bias. Further, the estimated prudence is substantially higher for liquidity-constrained households.

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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2006/2006cf448.pdf
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-448.

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Length: 13pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:tky:fseres:2006cf448
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  1. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-46, April.
  2. Orazio Attanasio & Hamish Low, 2002. "Estimating Euler equations," IFS Working Papers W02/06, Institute for Fiscal Studies.
  3. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
  4. Carroll, Christopher D. & Kimball, Miles S., 2006. "Precautionary Saving and Precautionary Wealth," CFS Working Paper Series 2006/02, Center for Financial Studies (CFS).
  5. Christopher D. Carroll, 1997. "Death to the Log-Linearized Consumption Euler Equation! (And Very Poor Health to the Second-Order Approximation)," NBER Working Papers 6298, National Bureau of Economic Research, Inc.
  6. Dirk Krueger & Fabrizio Perri, 2005. "Does income inequality lead to consumption equality? evidence and theory," Staff Report 363, Federal Reserve Bank of Minneapolis.
  7. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January.
  8. Sydney Ludvigson & Christina H. Paxson, 1999. "Approximation Bias in Linearized Euler Equations," NBER Technical Working Papers 0236, National Bureau of Economic Research, Inc.
  9. James Banks & Richard Blundell & Agar Brugiavini, 1999. "Risk pooling, precautionary saving and consumption growth," IFS Working Papers W99/19, Institute for Fiscal Studies.
  10. Jonathan Parker & Bruce Preston, 2002. "Precautionary Saving and Consumption Fluctuations," NBER Working Papers 9196, National Bureau of Economic Research, Inc.
  11. Merrigan, Philip & Normandin, Michel, 1996. "Precautionary Saving Motives: An Assessment from UK Time Series of Cross-Sections," Economic Journal, Royal Economic Society, vol. 106(438), pages 1193-1208, September.
  12. Dynan, Karen E, 1993. "How Prudent Are Consumers?," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1104-13, December.
  13. Karen E. Dynan, 1993. "How prudent are consumers?," Working Paper Series / Economic Activity Section 135, Board of Governors of the Federal Reserve System (U.S.).
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