We study the effect of income uncertainty on consumption in a model that includes precautionary saving. In contrast to previous studies, we focus on time-series variation in income uncertainty. Our time-series measure of income uncertainty is constructed from a panel of forecasts. We find evidence of precautionary saving in that increases in income uncertainty are related to increases in aggregate rates of savings.
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Paper provided by Australian National University - Department of Economics in its series Papers with number
345.
Length: 27 pages Date of creation: 1998 Date of revision: Handle: RePEc:fth:aunaec:345
Contact details of provider: Postal: THE AUSTRALIAN NATIONAL UNIVERSITY, DEPARTMENT OF ECONOMICS, RESEARCH SCHOOL of PACIFIC STUDIES, RESEARCH SCHOOL OF SOCIAL SCIENCES, G.P.O. 4, CANBERRA ACT 2601 AUSTRALIA..O. BOX 4 CANBERRA 2601 AUSTRALIA. Web page: http://economics.anu.edu.au/economics.htm More information through EDIRC
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Find related papers by JEL classification: E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
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