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

By Christopher Carroll, Martin Sommer, Jiri Slacalek

September 1, 2012

Preview Citation

Format: Chicago

Christopher Carroll, Martin Sommer, and Jiri Slacalek. Dissecting Saving Dynamics: Measuring Wealth, Precautionary, and Credit Effects, (USA: International Monetary Fund, 2012) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Credit, Disposable income, Income, Labor, Money, National accounts, Personal income, Unemployment

Keywords: Business cycle, CEA index, Consumption, Consumption function, Credit, Credit condition, Credit supply conditions CEA, Disposable income, Income, Personal income, Precautionary motive, Saving, Saving rate, Target wealth ratio, Uncertainty, Unemployment, Unemployment rate, Unemployment risk, Wealth, WP

Publication Details

Pages:

47
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2012/219
Stock No:

WPIEA2012219
ISBN:

9781475505696
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers