Paradiso, Antonio and Rao, B. Bhaskara (2011): What Caused the Decline in the US Saving Ratio?
Download (329kB) | Preview
We investigate whether the mortgage equity withdrawal (MEW) mechanism is useful for explaining the large declines in the US personal saving ratio in the last two decades. MEW depends on house price inflation and mortgage rates. In addition stock prices may affect saving ratio. Therefore, we estimate a VEC model with these four variables. The impulse response analysis shows that saving ratio decreases with positive shocks to asset prices and increases with positive shocks to mortgage rates.
|Item Type:||MPRA Paper|
|Original Title:||What Caused the Decline in the US Saving Ratio?|
|Keywords:||Saving ratio MEW VEC asset prices interest rates|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth
|Depositing User:||Antonio Paradiso|
|Date Deposited:||10. Jan 2011 20:53|
|Last Modified:||17. Mar 2015 18:26|
Bernanke, B. S., and Gertler, M. 1999. Monetary policy and asset price volatility. Federal Reserve Bank of Kansas City Economic Review 4: 17–53.
Greenspan, A., and Kennedy, J. 2008. Sources and uses of equity extracted from homes. Oxford Review of Economic Policy 24: 120–144.
Guidolin, M., and La Jeunesse 2007. The decline of the U.S. personal saving rate: Is it real and is it a puzzle? Federal Reserve Bank of St. Louis Review 89: 491–514.
Hatzius, J. 2006. Housing holds the key to Fed policy. Global Economics Paper No. 37, Goldman Sachs.
Johansen, S. 1995. Likelihood-based inference in cointegrated vector autoregressive models. Oxford: Oxford University Press.
Juselius, K. 2001. Big shocks, outliers and interventions. A cointegration and common trends analysis of daily bond rates. Mimeo, European University Institute, Florence.
Juselius, K. 2006. The cointegrated VAR model: Methodology and applications. Oxford: Oxford University Press.
Leamer, E. E. 2008. Housing is the business cycle. Proceedings, Federal Reserve Bank of Kansas City: 359–413.
Mehra, Y. P. 1996. Monetary policy and long-term interest rates. Federal Reserve Bank of Richmond Economic Quarterly 82: 27–49.
Lutkepohl, L., and Kratzick, M. 2004. Applied time series econometrics. Cambridge: Cambridge University Press.
Saikkonen, P., and Lutkepohl, H. 2000. Testing for cointegrating rank of a VAR process with an intercept. Econometric Theory 16: 373–406.