What Caused the Decline in the US Saving Ratio?

Antonio Paradiso () and B. Rao

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate whether the mortgage equity withdrawal (MEW) mechanism is useful for explaining the large declines in the US personal saving ratio in the last two decades. MEW depends on house price inflation and mortgage rates. In addition stock prices may affect saving ratio. Therefore, we estimate a VEC model with these four variables. The impulse response analysis shows that saving ratio decreases with positive shocks to asset prices and increases with positive shocks to mortgage rates.

Keywords: Saving; ratio; MEW; VEC; asset; prices; interest; rates (search for similar items in EconPapers)
JEL-codes: C32 E21 (search for similar items in EconPapers)
Date: 2011-01-05
New Economics Papers: this item is included in nep-mac
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