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The effects of the pandemic on households' financial savings: a Bayesian structural VAR analysis

Author

Listed:
  • Luigi Infante

    (Bank of Italy)

  • Francesca Lilla

    (Bank of Italy)

  • Francesco Vercelli

    (Bank of Italy)

Abstract

Following the outbreak of the COVID-19 pandemic, Italian households’ financial savings reached exceptionally high levels. Using a time-varying coefficients VAR model with stochastic volatility, the paper aims to identify the impact of the COVID-19 pandemic on households’ financial savings and other macroeconomic variables, distinguishing between a containment shock, a fear-of-infection shock, and an uncertainty shock. We find that the impact of the containment shock on financial savings is positive and high, whereas the impacts of the fear-of-infection and the uncertainty shocks are lower. Based on our counterfactual exercises, in the absence of the three identified shocks, from March to December 2020, financial savings would have been much lower than the value observed (€67 billion instead of €110 billion).

Suggested Citation

  • Luigi Infante & Francesca Lilla & Francesco Vercelli, 2023. "The effects of the pandemic on households' financial savings: a Bayesian structural VAR analysis," Temi di discussione (Economic working papers) 1421, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1421_23
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2023/2023-1421/en_tema_1421.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    households' financial savings; COVID-19; outliers; time-varying VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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