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 Dr. Jiří Slačálek: “Dissecting Saving Dynamics: Measuring Credit, Wealth and Precautionary Effects”European Central Bank, Frankfurt am Main, Germany Authors: Christopher Carroll, Jiri Slacalek, and Martin Sommer Abstract: We argue that the US personal saving rate's long stability (from the 1960s through the early 1980s), subsequent steady decline (1980s-2007), and recent substantial increase (2008-2010) can all be interpreted using a parsimonious 'buffer stock' model of optimal consumption choice in the presence uncertainty and credit constraints. According to the model, saving depends on the gap between 'target' wealth and actual wealth, where the target depends on credit conditions and uncertainty. The model identifies target wealth using measures of actual wealth, uncertainty, credit availability and households' saving choices. Our results suggest that increased credit availability accounts for most of the saving rate's long-term decline, while the gap between target and actual wealth captures the bulk of the business-cycle variation (including an important part attributable to cyclical movements in the precautionary motive). The model suggests that the U.S. personal saving rate will likely remain for a considerable time in the neighborhood of the 5-7 percent range that has prevailed since the end of 2009. Full Text: “Dissecting Saving Dynamics: Measuring Credit, Wealth and Precautionary Effects” WILL BE AVAILABLE IN DUE COURSE |
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