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Dissecting saving dynamics: Measuring wealth, precautionary, and credit effects

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  • Carroll, Christopher D.
  • Slacalek, Jiri
  • Sommer, Martin

Abstract

We argue that the US personal saving rate's long stability (1960s-1980s), subsequent steady decline (1980s-2007), and recent substantial rise (2008-2011) can be interpreted using a parsimonious buffer stock model of consumption in the presence of labor income uncertainty and credit constraints. Saving in the model is affected by the gap between target and actual wealth, with the target determined by credit conditions and uncertainty. An estimated structural version of the model suggests that increased credit availability accounts for most of the long-term saving decline, while fluctuations in wealth and uncertainty capture the bulk of the business-cycle variation.

Suggested Citation

  • Carroll, Christopher D. & Slacalek, Jiri & Sommer, Martin, 2012. "Dissecting saving dynamics: Measuring wealth, precautionary, and credit effects," CFS Working Paper Series 2012/10, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:201210
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    Cited by:

    1. Fabrizio Perri & Jonathan Heathcote, 2011. "Wealth and Volatility," 2011 Meeting Papers 1065, Society for Economic Dynamics.
    2. Jiri Slacalek, 2012. "What drives the US personal saving rate? The role of wealth, credit and uncertainty," Research Bulletin, European Central Bank, vol. 16, pages 10-12.
    3. Sule Alan & Thomas Crossley & Hamish Low, 2012. "Saving on a Rainy Day, Borrowing for a Rainy Day," Koç University-TUSIAD Economic Research Forum Working Papers 1212, Koc University-TUSIAD Economic Research Forum.
    4. Luca Fornaro, 2012. "International debt deleveraging," Economics Working Papers 1401, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2016.
    5. Kyle Herkenhoff & Gordon Phillips & Ethan Cohen-Cole, 2017. "The Impact of Consumer Credit Access on Employment, Earnings, and Entrepreneurship," Working Papers 2017-011, Human Capital and Economic Opportunity Working Group.
    6. Kyle Herkenhoff & Gordon Phillips & Ethan Cohen-Cole, 2016. "The Impact of Consumer Credit Access on Employment, Earnings and Entrepreneurship," NBER Working Papers 22846, National Bureau of Economic Research, Inc.
    7. repec:mes:emfitr:v:53:y:2017:i:11:p:2585-2608 is not listed on IDEAS
    8. Ángel Estrada & Daniel Garrote & Eva Valdeolivas & Javier Vallés, 2015. "Household Debt and Uncertainty: Private Consumption after the Great Recession," Monetaria, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 71-109, january-j.
    9. André K. Anundsen & Ragnar Nymoen, 2015. "Did US consumers ‘save for a rainy day’ before the Great Recession?," Working Paper 2015/08, Norges Bank.
    10. Jimeno, Juan F., 2015. "Long-lasting consequences of the European crisis," Working Paper Series 1832, European Central Bank.
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    12. Kyle Herkenhoff, 2014. "The Impact of Consumer Credit Access on Unemployment," 2014 Meeting Papers 448, Society for Economic Dynamics.
    13. William Gatt, "undated". "The determinants of household saving behaviour in Malta," CBM Working Papers WP/03/2014, Central Bank of Malta.
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    More about this item

    Keywords

    Consumption; Saving; Wealth; Credit; Uncertainty;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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