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Saving and the long shadow of macroeconomic shocks

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  • Aizenman, Joshua
  • Noy, Ilan
Abstract
The global crisis of 2008 raises many questions regarding the long-term response to crises. We know that households that lost access to credit, for example, were forced to adjust and increase saving. But, will households keep on saving more than they would have done otherwise had the global financial crisis not occurred? And for how long will this increased saving persist? Here, we study the degree to which past adverse income shocks increase the saving rates of affected households. We find evidence consistent with history-dependent dynamics: more experience of past crises tends to increase household saving. We follow up with an investigation of the importance of historical exposure for current account dynamics, but find no strong indication that our measure of past exposure is important to the current account's determination. We conclude by estimating the likely impact of the 2008 GFC on future saving.

Suggested Citation

  • Aizenman, Joshua & Noy, Ilan, 2015. "Saving and the long shadow of macroeconomic shocks," Journal of Macroeconomics, Elsevier, vol. 46(C), pages 147-159.
  • Handle: RePEc:eee:jmacro:v:46:y:2015:i:c:p:147-159
    DOI: 10.1016/j.jmacro.2015.08.007
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    Cited by:

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    2. Adamopoulou, Effrosyni & Olivieri, Elisabetta & Triviza, Eleftheria, 2024. "Eating habits, food consumption, and health: The role of early life experiences," European Economic Review, Elsevier, vol. 166(C).
    3. Joshua Aizenman & Yin-Wong Cheung & Hiro Ito, 2019. "The Interest Rate Effect on Private Saving: Alternative Perspectives," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 1-37, February.
    4. Aleksandra Kolasa & Barbara Liberda, 2014. "Determinants of saving in Poland: Are they different than in other OECD countries?," Working Papers 2014-13, Faculty of Economic Sciences, University of Warsaw.
    5. James Bootsma & Thomas J. Carter & Xin Scott Chen & Christopher Hajzler & Argyn Toktamyssov, 2020. "2020 US Neutral Rate Assessment," Discussion Papers 2020-12, Bank of Canada.
    6. Cristina Badarau & Florence Huart & Ibrahima Sangaré, 2021. "Households saving and financial spillovers in the Euro area," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 660-687, October.
    7. Lorenzo Pozzi & Barbara Sadaba, 2021. "Macroeconomic disasters and consumption smoothing," Tinbergen Institute Discussion Papers 21-030/VI, Tinbergen Institute.
    8. Papadovasilaki, Dimitra & Guerrero, Federico & Sundali, James, 2018. "The effect of early and salient investment experiences on subsequent asset allocations—An experimental study," Journal of Behavioral and Experimental Finance, Elsevier, vol. 19(C), pages 1-19.
    9. Azreen Karim & Ilan Noy, 2016. "Poverty And Natural Disasters — A Qualitative Survey Of The Empirical Literature," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(01), pages 1-36, March.
    10. Jakub Borowski & Krystian Jaworski, 2023. "Economic and behavioral determinants of forced household savings during the COVID-19 pandemic," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(1), pages 237-253, February.
    11. Katerina Koka, 2015. "The Impact of the Population Age Structure on the Response to Negative Asset Shocks," Economics Bulletin, AccessEcon, vol. 35(4), pages 2270-2281.
    12. Diana De Alwis & Ilan Noy, 2019. "Sri Lankan households a decade after the Indian Ocean tsunami," Review of Development Economics, Wiley Blackwell, vol. 23(2), pages 1000-1026, May.

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    More about this item

    Keywords

    Saving; Household saving; Shocks; Rare disasters;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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