The effects of the pandemic on households' financial savings: a Bayesian structural VAR analysis

Luigi Infante, Francesca Lilla () and Francesco Vercelli ()
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Francesca Lilla: Bank of Italy
Francesco Vercelli: Bank of Italy

No 1421, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Following the outbreak of the COVID-19 pandemic, Italian households’ financial savings reached exceptionally high levels. Using a time-varying coefficients VAR model with stochastic volatility, the paper aims to identify the impact of the COVID-19 pandemic on households’ financial savings and other macroeconomic variables, distinguishing between a containment shock, a fear-of-infection shock, and an uncertainty shock. We find that the impact of the containment shock on financial savings is positive and high, whereas the impacts of the fear-of-infection and the uncertainty shocks are lower. Based on our counterfactual exercises, in the absence of the three identified shocks, from March to December 2020, financial savings would have been much lower than the value observed (€67 billion instead of €110 billion).

Keywords: households' financial savings; COVID-19; outliers; time-varying VAR (search for similar items in EconPapers)
JEL-codes: C32 E21 E44 (search for similar items in EconPapers)
Date: 2023-10
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