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COVID-19 and the increase in household savings: an update

Author

Listed:
  • Dossche, Maarten
  • Krustev, Georgi
  • Zlatanos, Stylianos
Abstract
The propensity of households to save has reached extraordinary levels since early 2020. This box analyses the drivers of this surge and tries to infer what they imply for private consumption as the pandemic is brought under control. On the one hand, the spike in household savings mostly comprises involuntary savings held to a large extent in the form of liquid assets, while the effects of the pandemic on household income have been limited. On the other hand, the additional savings are concentrated among older and higher-income households which, together with the services-led nature of the slump in consumption, suggests that these savings have only a limited potential to boost private consumption. Overall, the underlying drivers of the recent surge in household savings do not suggest much of an additional boost to the expected rebound in private consumption in the coming year. JEL Classification: E21, E32

Suggested Citation

  • Dossche, Maarten & Krustev, Georgi & Zlatanos, Stylianos, 2021. "COVID-19 and the increase in household savings: an update," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2021:0005:4
    Note: 3577821
    as

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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/focus/2021/html/ecb.ebbox202105_04~d8787003f8.en.html
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    Citations

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    Cited by:

    1. Sologon, Denisa Maria & O'Donoghue, Cathal & Linden, Jules & Kyzyma, Iryna & Loughrey, Jason, 2022. "Welfare and Distributional Impact of Soaring Prices in Europe," IZA Discussion Papers 15738, Institute of Labor Economics (IZA).
    2. Can, Zeynep Gizem & O'Donoghue, Cathal & Sologon, Denisa Maria & Smith, Darius & Griffin, Rosaleen & Murray, Una, 2023. "Modelling the Distributional Effects of the Cost-of-Living Crisis in Turkey and the South Caucasus: A Microsimulation Analysis," IZA Discussion Papers 16619, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Business cycle fluctuations; Consumption; Saving;
    All these keywords.

    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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