Business Cycle Fluctuations and Private Savings in OECD Countries: A Panel Data Analysis

Yvonne Adema and Lorenzo Pozzi
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Lorenzo Pozzi: Erasmus University Rotterdam

No 12-144/VI, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper led to a publication in the 'European Economic Review' . Vol. 79, pages 214-233.

We investigate the cyclicality of the private savings to GDP ratio for a panel of 19 OECD countries over the period 1971-2009. We find robust evidence that the private savings ratio is countercyclical. Three theories unambiguously predict a higher private savings ratio during recessions: a Ricardian offset effect, the presence of credit constraints, and precautionary savings. We find evidence only for the latter theory. Our estimations take into account a large number of econometric complications: persistence in the savings ratio, endogeneity of the regressors, cross-country parameter heterogeneity, cross-sectional dependence, stationarity issues, omitted variables, and instrument strength.

Keywords: Private Savings; Business Cycles; Ricardian offset; Credit Constraints; Precautionary Savings; Dynamic Panel; Cross-Sectional Dependence (search for similar items in EconPapers)
JEL-codes: C23 E21 E32 (search for similar items in EconPapers)
Date: 2012-12-17
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20120144

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