Dissecting saving dynamics: measuring wealth, precautionary and credit effects

Jiri Slacalek, Martin Sommer and Christopher Carroll

No 1474, Working Paper Series from European Central Bank

Abstract: We argue that the U.S. personal saving rate's long stability (from the 1960s through the early 1980s), subsequent steady decline (1980s-2007), and recent substantial increase (2008-2011) can all be interpreted using a parsimonious `buffer stock' model of optimal 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 wealth determined by credit conditions and uncertainty. An estimated structural version of the model suggests that increased credit availability accounts for most of the saving rate's long-term decline, while fluctuations in net wealth and uncertainty capture the bulk of the business-cycle variation. JEL Classification: E21, E32

Keywords: consumption; credit availability; saving; uncertainty; wealth (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-dge and nep-mac
Note: 1111765
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

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Related works:
Working Paper: Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects (2019)
Working Paper: Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects (2012)
Working Paper: Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects (2012)
Working Paper: Dissecting saving dynamics: Measuring wealth, precautionary, and credit effects (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20121474

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