Zaman, Rubaiya and Carannate, Maria and Ferra, Emi (2013): Effects of Uncertainty on Household Saving Rate.
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Abstract
In this master thesis we attempted to investigate the role of economic uncertainty in driving the behavior of household savings for six European countries: Germany, France, Finland, United Kingdom (UK), Portugal and Italy. We focused on three main sources of economic uncertainty: Unemployment Risk, Fiscal Policy Uncertainty and Financial Crisis-Investment risk. We used Unemployment rate as a proxy for labor income uncertainty and the risk of an income loss. We computed the volatility of financial stock prices for each country as an indicator for the presence of a financial crisis. With regard to policy uncertainty, we employed three different measures: a Policy Uncertainty Index constructed by Baker, Bloom, and Davis; Debt to GDP ratio and Government Surplus / Deficit over GDP. We estimated first a Structural Vector Autoregressive (SVAR) model, separately for each country, using quarterly data from 1999 to 2012 and we compared country-specific impulse responses on savings rates. We found that household savings rate reacts in response to fiscal and unemployment shocks differently in each country, whereas we didn’t find any significant response to financial stock price volatility. We then proceeded with the Bayesian estimation of the reduced form VARs for the panel of countries mentioned above as a Hierarchical Linear Model. We focused our analysis on the Average Impulse Responses with the aim of analyzing the aggregate effect on household savings of shocks shared by all countries.
Item Type: | MPRA Paper |
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Original Title: | Effects of Uncertainty on Household Saving Rate |
English Title: | Effects of Uncertainty on Household Saving Rate |
Language: | English |
Keywords: | Household saving rate, uncertainty, fiscal, financial, unemplyoment |
Subjects: | E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E29 - Other |
Item ID: | 51208 |
Depositing User: | Rubaiya Zaman |
Date Deposited: | 05 Nov 2013 18:56 |
Last Modified: | 28 Sep 2019 19:32 |
References: | Basten, Christoph & Fagereng, Andreas & Telle Kjetil, 2013. “Saving and Portfolio Allocation Before and After Job Loss”. KOF Swiss Economic Institute, ETH Zurich. Baker, Scott R., Bloom, Nicholas, 2012. “Measuring Economic Policy Uncertainty” Beaudry, Paul & Portier, Franck,2004 .“ Stock Price s, News And Economic Fluctuations” Working Paper 10548, National Bureau of Economic Research,1050 Massachusetts Avenue. Bernanke, Ben S.,2005. “The Global Saving Glut and the U.S. Current Account Deficit”, Available at http://www.federalreserve.gov/boarddocs/speeches/2005/200503102/ Global Finance, “Household Savings Rate’’ Available at http://www.gfmag.com/tools/global-database/economic-data/12065-household-saving-rates.html#axzz2UQjplN47 L¨utkepohl, Helmut & Kr¨atzig, Markus & Boreiko, Dmitri, 2006.“VAR Analysis in JMulTi”. Meng, Xin. 2003.”Unemployment, consumption smoothin g, and precautionary saving in urban China”. Research School of Pacific and Asian Studie s, Australian National University, ACT 0200, Australia. Steinar, Holden & Victoria, Sparrman, 2011."Do Government Purchases AffectUnemployment?," CESifo Working Paper Series 3482, CESifo Group Munich. Sum,Vichet, 2012. Financial Stress and Economic Policy Uncertainty: Impulse Response Functions and Causality. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/51208 |