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Saving and credit market development

Author

Listed:
  • Matteo Pignatti

    (New York University)

  • Frederic Lambert

    (New York University)

Abstract

Life-cycle saving profiles show striking differences across countries. At all ages, saving as a percentage of disposable income is higher in Italy than in the United States. The saving profile is also much flatter. This paper focuses on the effect of differences in credit market development on saving behavior. Using a heterogeneous-agent overlapping-generation model calibrated on micro data for the United States and Italy, we investigate the impact of different types of borrowing constraints designed to capture various features of credit markets, on individual life-cycle saving behavior and aggregate saving. We use downpayment constraints to model differences in mortgage markets and participation constraints to account for different bankruptcy provisions. We show that the model can account for part of the cross-country differences observed in the data.

Suggested Citation

  • Matteo Pignatti & Frederic Lambert, 2007. "Saving and credit market development," 2007 Meeting Papers 652, Society for Economic Dynamics.
    • Handle: RePEc:red:sed007:652
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