IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v54y2023ics1544612323000855.html
   My bibliography  Save this article

COVID-19 vaccination and household savings: An economic recovery channel

Author

Listed:
  • Ren, He
  • Zheng, Yi

Abstract

The COVID-19 pandemic increased people’s propensity for precautionary savings in response to economic recession (e.g., Mody et al., 2012; Gropp and McShane, 2021; Levine et al., 2021). However, as the relevant vaccine roll-out continues, it mitigates people’s concerns and boosts the macroeconomy, which leads to significant declines in household precautionary saving motives. Consistent with this expectation, using U.S. county-level vaccination, deposit, economic, and demographic data, we show that there is a significant negative relationship between COVID-19 vaccination and household savings. We attribute this negative relationship to an economic recovery channel because our findings also suggest that the vaccination has a strong negative impact on the unemployment rate and results in increases in consumer spending. Overall, our study adds to an emerging strand of literature on how COVID-19 vaccination affects households’ financial behaviors.

Suggested Citation

  • Ren, He & Zheng, Yi, 2023. "COVID-19 vaccination and household savings: An economic recovery channel," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000855
    DOI: 10.1016/j.frl.2023.103711
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612323000855
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2023.103711?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Scott R Baker & Robert A Farrokhnia & Steffen Meyer & Michaela Pagel & Constantine Yannelis & Jeffrey Pontiff, 0. "How Does Household Spending Respond to an Epidemic? Consumption during the 2020 COVID-19 Pandemic," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(4), pages 834-862.
    2. Gonzalez-Eiras, Martín & Niepelt, Dirk, 2022. "The political economy of early COVID-19 interventions in US states," Journal of Economic Dynamics and Control, Elsevier, vol. 140(C).
    3. Ashoka Mody & Franziska Ohnsorge & Damiano Sandri, 2012. "Precautionary Savings in the Great Recession," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(1), pages 114-138, April.
    4. Thomas Hale & Noam Angrist & Rafael Goldszmidt & Beatriz Kira & Anna Petherick & Toby Phillips & Samuel Webster & Emily Cameron-Blake & Laura Hallas & Saptarshi Majumdar & Helen Tatlow, 2021. "A global panel database of pandemic policies (Oxford COVID-19 Government Response Tracker)," Nature Human Behaviour, Nature, vol. 5(4), pages 529-538, April.
    5. Itamar Drechsler & Alexi Savov & Philipp Schnabl, 2017. "The Deposits Channel of Monetary Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 132(4), pages 1819-1876.
    6. Ross Levine & Chen Lin & Mingzhu Tai & Wensi Xie, 2021. "How Did Depositors Respond to COVID-19? [A crisis of banks as liquidity providers]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5438-5473.
    7. Yixing Zhang & Xiaomeng Lu & Qiu Zhong, 2022. "Pandemic, Precautionary Saving, and Household Portfolio Choice: Evidence from China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(15), pages 4338-4349, December.
    8. Coibion, Olivier & Gorodnichenko, Yuriy & Weber, Michael, 2020. "The Cost of the COVID-19 Crisis: Lockdowns, Macroeconomic Expectations, and Consumer Spending," Department of Economics, Working Paper Series qt4jn1x65h, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    9. Fu, Yuting & Jin, Hanqing & Xiang, Haitao & Wang, Ning, 2022. "Optimal lockdown policy for vaccination during COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 45(C).
    10. Rabeh Khalfaoui & H. Nammouri & O. Labidi & S. Ben Jabeur, 2021. "Is the COVID-19 vaccine effective on the US financial market?," Post-Print hal-03797580, HAL.
    11. Michael D. Hurd & Susann Rohwedder, 2010. "Effects of the Financial Crisis and Great Recession on American Households," NBER Working Papers 16407, National Bureau of Economic Research, Inc.
    12. Gropp, Reint & McShane, William, 2021. "Why are households saving so much during the corona recession?," IWH Policy Notes 1/2021, Halle Institute for Economic Research (IWH).
    13. Christopher D. Carroll & Andrew A. Samwick, 1998. "How Important Is Precautionary Saving?," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 410-419, August.
    14. Alexander W. Bartik & Marianne Bertrand & Zoë B. Cullen & Edward L. Glaeser & Michael Luca & Christopher T. Stanton, 2020. "How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey," NBER Working Papers 26989, National Bureau of Economic Research, Inc.
    15. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
    16. Lydon, Reamonn & McIndoe-Calder, Tara, 2021. "Saving during the pandemic: Waiting out the storm?," Economic Letters 4/EL/21, Central Bank of Ireland.
    17. Engen, Eric M. & Gruber, Jonathan, 2001. "Unemployment insurance and precautionary saving," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 545-579, June.
    18. Chan, Kam Fong & Chen, Zhuo & Wen, Yuanji & Xu, Tong, 2022. "COVID-19 vaccines and global stock markets," Finance Research Letters, Elsevier, vol. 47(PB).
    19. Goodell, John W., 2020. "COVID-19 and finance: Agendas for future research," Finance Research Letters, Elsevier, vol. 35(C).
    20. Virat Agrawal & Jonathan H. Cantor & Neeraj Sood & Christopher M. Whaley, 2021. "The Impact of the COVID-19 Vaccine Distribution on Mental Health Outcomes," NBER Working Papers 29593, National Bureau of Economic Research, Inc.
    21. Skidmore, Mark, 2001. "Risk, natural disasters, and household savings in a life cycle model," Japan and the World Economy, Elsevier, vol. 13(1), pages 15-34, January.
    22. Dursun-de Neef, H. Özlem & Schandlbauer, Alexander, 2022. "COVID-19, bank deposits, and lending," Journal of Empirical Finance, Elsevier, vol. 68(C), pages 20-33.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Srivastava, Nikhil & Tripe, David & Yuen, Mui Kuen, 2023. "Healthcare expenditure and bank deposits," Finance Research Letters, Elsevier, vol. 58(PC).
    2. Romana Głowicka-Wołoszyn & Andrzej Wołoszyn & Joanna Stanisławska & Amílcar Oliveira & Teresa Oliveira, 2024. "Impact of the COVID-19 Pandemic on the Financial Situation of Rural and Urban Households in Poland," Sustainability, MDPI, vol. 16(19), pages 1-25, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zheng, Yi & Ren, He, 2024. "COVID-19 vaccination and housing payments," Journal of Housing Economics, Elsevier, vol. 64(C).
    2. Dursun-de Neef, H. Özlem & Schandlbauer, Alexander, 2022. "COVID-19, bank deposits, and lending," Journal of Empirical Finance, Elsevier, vol. 68(C), pages 20-33.
    3. Li, Yanshuang & Shi, Yujie & Shi, Yongdong & Yi, Shangkun & Zhang, Weiping, 2023. "COVID-19 vaccinations and risk spillovers: Evidence from Asia-Pacific stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    4. Lugilde, Alba & Bande, Roberto & Riveiro, Dolores, 2017. "Precautionary Saving: a review of the theory and the evidence," MPRA Paper 77511, University Library of Munich, Germany.
    5. Yavuz Arslan & Ahmet Degerli & Gazi Kabaş, 2019. "Unintended consequences of unemployment insurance benefits: the role of banks," BIS Working Papers 795, Bank for International Settlements.
    6. Marcus Klemm, 2012. "Job Security Perceptions and the Saving Behavior of German Households," Ruhr Economic Papers 0380, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    7. Claudio Soto G., 2004. "Unemployment and Consumption in Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 7(1), pages 31-50, April.
    8. Orland, Andreas & Rostam-Afschar, Davud, 2021. "Flexible work arrangements and precautionary behavior: Theory and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 442-481.
    9. Ross Levine & Chen Lin & Mingzhu Tai & Wensi Xie, 2021. "How Did Depositors Respond to COVID-19? [A crisis of banks as liquidity providers]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5438-5473.
    10. Erik Hurst & Arthur Kennickell & Annamaria Lusardi & Francisco Torralba, 2005. "Precautionary Savings and the Importance of Business Owners," NBER Working Papers 11731, National Bureau of Economic Research, Inc.
    11. Lorenzo Pozzi & Barbara Sadaba, 2023. "Macroeconomic Disasters and Consumption Smoothing: International Evidence from Historical Data," Staff Working Papers 23-4, Bank of Canada.
    12. Li, Shi & Li, Meng & Fu, Rongsha, 2024. "A sustainable pandemic response: The impact of COVID-19 vaccination coverage on economic policy uncertainty," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 316-332.
    13. repec:zbw:rwirep:0380 is not listed on IDEAS
    14. L. Pozzi, 2005. "Income uncertainty and aggregate consumption," Working Paper Research 77, National Bank of Belgium.
    15. Servaas Deroose (Editor), 2006. "Assessing the factors of resilience of private consumption in the euro area," European Economy - Economic Papers 2008 - 2015 252, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    16. Yoshihiko Kadoya, 2016. "What makes people anxious about life after the age of 65? Evidence from international survey research in Japan, the United States, China, and India," Review of Economics of the Household, Springer, vol. 14(2), pages 443-461, June.
    17. Christopher D. Carroll & Miles S. Kimball, 2006. "Precautionary Saving and Precautionary Wealth," Economics Working Paper Archive 530, The Johns Hopkins University,Department of Economics.
    18. Ascaryan Rafinda & Timea Gal, 2022. "Covid-19 Pandemic And Its Impact On Household Financial Behavior In Indonesia," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 7(special), pages 77-85, June.
    19. Chou, Shin-Yi & Liu, Jin-Tan & Hammitt, James K., 2003. "National Health Insurance and precautionary saving: evidence from Taiwan," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1873-1894, September.
    20. Sanjit Dhami & Narges Hajimoladarvish & Konstantinos Georgalos, 2023. "Precautionary Savings, Loss Aversion, and Risk: Theory and Evidence," CESifo Working Paper Series 10570, CESifo.
    21. Barbara Broadway & John P. Haisken-DeNew, 2019. "Keep calm and consume? Subjective uncertainty and precautionary savings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(3), pages 481-505, July.

    More about this item

    Keywords

    Coronavirus; Vaccines; Household finance; Household savings; Deposit growth; Unemployment;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000855. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.