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

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Listed author(s):
  • 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.

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Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2012/10.

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Date of creation: 2012
Handle: RePEc:zbw:cfswop:201210
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Keywords: Consumption; Saving; Wealth; Credit; Uncertainty;

Other versions of this item:

Find related papers by 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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