Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects

Christopher Carroll, Jiri Slacalek and Martin Sommer

No 26131, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We show that an estimated tractable ‘buffer stock saving’ model can match the 30-year decline in the U.S. saving rate leading up to 2007, the sharp increase during the Great Recession, and much of the intervening business cycle variation. In the model, saving depends on the gap between ‘target’ and actual wealth, with the target determined by measured credit availability and measured unemployment expectations. Following financial deregulation starting in the late 1970s, expanding credit supply explains the trend decline in saving, while fluctuations in wealth and consumer-survey-measured unemployment expectations capture much of the business-cycle variation, including the sharp rise during the Great Recession.

JEL-codes: D14 E2 E21 E24 E44 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-ban, nep-dge and nep-mac
Note: EFG ME
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Citations: View citations in EconPapers (46)

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Related works:
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)
Working Paper: Dissecting saving dynamics: Measuring wealth, precautionary, and credit effects (2012)
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