Arbeitspapier
Saving on a Rainy Day, Borrowing for a Rainy Day
The aim of this paper is to understand what a recession means for individual consumers, and to model in a life-cycle framework how individuals respond to recessions. Our focus is on the sharp increase in savings rates that have been observed in the current and recent recessions. We show empirically that these saving spikes were short-lived and common to all working age groups. We then study life-cycle models in which recessions involve one or more of: (i) an aggregate permanent negative shock to individual income; (ii) an increase in the variance of idiosyncratic permanent shocks; (iii) a tightening of credit constraints; (iv) asset market crashes. In simulations and in the data we aggregate explicitly from individual behavior. We model credit tightening as a constraint on new borrowing and this generates an option value of borrowing in good times. We show that the rise in the aggregate savings ratio is driven by increases in uncertainty, rather than tighening of credit; temporary shocks to the supply of credit generate increases in saving only among younger agents.
- Sprache
-
Englisch
- Erschienen in
-
Series: Working Paper ; No. 1212
- Klassifikation
-
Wirtschaft
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
Macroeconomics: Consumption; Saving; Wealth
Household Saving; Personal Finance
Financial Crises
- Thema
-
credit constraints
savings
recessions
uncertainty
Konjunktur
Liquiditätsbeschränkung
Konsumentenverhalten
Sparen
Lebenszyklus
Simulation
Entscheidung unter Unsicherheit
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Alan, Sule
Crossley, Thomas
Low, Hamish
- Ereignis
-
Veröffentlichung
- (wer)
-
Koç University-TÜSİAD Economic Research Forum (ERF)
- (wo)
-
Istanbul
- (wann)
-
2012
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Alan, Sule
- Crossley, Thomas
- Low, Hamish
- Koç University-TÜSİAD Economic Research Forum (ERF)
Entstanden
- 2012
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