Did Us Consumers "Save for a Rainy Day" Before the Great Recession?

Arbeitspapier

The 'saving for a rainy day' hypothesis implies that households' saving decisions reflect that they can (rationally) predict future income declines. The empirical relevance of this hypothesis plays a key role in discussions of fiscal policy multipliers and it holds under the null that the permanent income hypothesis is true. We find mixed support for this hypothesis using time series data for the 100 largest US Metropolitan Statistical Areas, as well as aggregate macro time series, for the period 1980q1-2011q4. That is, income is more often found to predict consumption and saving than the converse. Our modus operandi is to investigate the 'saving for a rainy day' hypothesis by testing (weak) exogeneity of income and consumption and by exploring the direction of Granger causality between the two series. We also give evidence that house price changes played a role in the US income and consumption dynamics, before, during and after the Great Recession.

Object Details

• ISBN: 978-82-7553-865-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 08/2015

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Model Construction and Estimation ; Model Evaluation, Validation, and Selection ; Macroeconomics: Consumption; Saving; Wealth ; Fiscal Policy
• Subject: Granger causality ; cointegration ; consumption ; permanent income hypothesis ; household saving

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Anundsen, André K. ; Nymoen, Ragnar
• Event: Veröffentlichung
• (who): Norges Bank
• (where): Oslo
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/210075
• Last update: 10.03.2025, 11:45 AM CET