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Excess Savings Are Recession-Specific and Compensatory: Evidence From the US

Author

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  • Liviu Voinea

    (International Monetary Fund)

  • Prakash Loungani

    (International Monetary Fund)

Abstract

There is a consensus among academics and policymakers that the excess savings built up by households during the past couple of years are specific to the pandemic. Based on data from the past half century for the US, this article shows that savings generally increase during recessions; the pandemic is different only by the magnitude of these savings, but not by their sign. Moreover, it suggests that these excess savings are rather compensatory than precautionary, as households save more to rebuild their lost wealth.

Suggested Citation

  • Liviu Voinea & Prakash Loungani, 2022. "Excess Savings Are Recession-Specific and Compensatory: Evidence From the US," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(4), pages 233-237, July.
    • Handle: RePEc:spr:intere:v:57:y:2022:i:4:d:10.1007_s10272-022-1059-0
    DOI: 10.1007/s10272-022-1059-0
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    References listed on IDEAS

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    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.
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    Cited by:

    1. Hamza Abdelrahman & Luiz E. Oliveira, 2023. "The Rise and Fall of Pandemic Excess Savings," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(11), pages 1-6, May.

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    More about this item

    Keywords

    D14; E21; E32;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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