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Perceived uncertainty as a key driver of household saving

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  • Levenko, Natalia

Abstract

The paper studies the determinants of household saving in Europe with particular focus on the impact of labour income uncertainty. Panel data models are estimated on aggregate national-level data for 22 European countries in 1996–2017 using system GMM. The household saving rate is highly persistent and is driven in large part by income growth and by changes in labour income uncertainty, which can be dissected into two components: realised uncertainty and expectations about future uncertainty. Credit availability, interest rates, inflation, and other macroeconomic and expectational variables have little or no effect on saving.

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  • Levenko, Natalia, 2020. "Perceived uncertainty as a key driver of household saving," International Review of Economics & Finance, Elsevier, vol. 65(C), pages 126-145.
    • Handle: RePEc:eee:reveco:v:65:y:2020:i:c:p:126-145
    DOI: 10.1016/j.iref.2019.10.005
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    Cited by:

    1. Levenko, Natalia, 2020. "Rounding bias in forecast uncertainty," Research in Economics, Elsevier, vol. 74(4), pages 277-291.
    2. Ana Lucia Luis & Natalia Teixeira & Rui Braz, 2023. "Portuguese Households Savings in Times of Pandemic: A Way to Better Resist the Escalating Inflation?," Papers 2304.02573, arXiv.org.
    3. Ahmed Imran Hunjra & Muhammad Azam & Mamdouh Abdulaziz Saleh Al‐Faryan, 2024. "The nexus between climate change risk and financial policy uncertainty," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1401-1416, April.
    4. Montserrat Guillen & Miguel Santolino & Xenxo Vidal-Llana, 2022. ""Inequality of subjective economic uncertainty and individual economic prospects in the pandemic period"," IREA Working Papers 202202, University of Barcelona, Research Institute of Applied Economics, revised Feb 2022.
    5. Adams, Samuel & Adedoyin, Festus & Olaniran, Eniola & Bekun, Festus Victor, 2020. "Energy consumption, economic policy uncertainty and carbon emissions; causality evidence from resource rich economies," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 179-190.
    6. Dajčman Silvo & Kavkler Alenka & Levenko Natalia & Romih Dejan, 2022. "Spillover effects of economic policy uncertainty on adult and youth unemployment," Review of Economic Perspectives, Sciendo, vol. 23(1), pages 47-70, December.
    7. Xu, Can, 2023. "Do households react to policy uncertainty by increasing savings?," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 770-785.
    8. Srivastava, Nikhil & Tripe, David & Yuen, Mui Kuen, 2023. "Healthcare expenditure and bank deposits," Finance Research Letters, Elsevier, vol. 58(PC).

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    More about this item

    Keywords

    Household saving rates; Financial crisis; Labour income uncertainty; Precautionary saving; Consumer expectations; System GMM;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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