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Inflation and the Savings Rate

Author

Listed:
  • Russell Davidson
  • James G. MacKinnon

Abstract

This paper examines two explanations of the observed positive relationship between inflation rates and saving rates in Canada and the United States. Several models are estimated using quarterly time series data from both countries, and the best of these are subjected to a variety of tests. One of the two explanations appears broadly consistent with the data. The observed relationship arises primarily because, in times of inflation, measured income and measured savings overstate the corresponding real and perceived quantities.

Suggested Citation

  • Russell Davidson & James G. MacKinnon, 1982. "Inflation and the Savings Rate," Working Paper 493, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:493
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_493.pdf
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    References listed on IDEAS

    as
    1. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    2. Jump, Gregory V, 1980. "Interest Rates, Inflation Expectations, and Spurious Elements in Measured Real Income and Saving," American Economic Review, American Economic Association, vol. 70(5), pages 990-1004, December.
    3. Bulkley, George, 1981. "Personal Savings and Anticipated Inflation," Economic Journal, Royal Economic Society, vol. 91(361), pages 124-135, March.
    4. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
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    Cited by:

    1. Henri-Paul Rousseau, 1983. "The Dome Syndrome: The Debt Overhanging Canadian Government and Business," Canadian Public Policy, University of Toronto Press, vol. 9(1), pages 37-52, March.

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    More about this item

    Keywords

    inflation; savings;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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