Precautionary saving in Spain during the Great Recession: evidence from a panel of uncertainty indicators

Alba Lugilde, Roberto Bande and Dolores Riveiro

MPRA Paper from University Library of Munich, Germany

Abstract: The aim of this paper is to study empirically the effect of uncertainty on private consumption using a sample of Spanish households, and to check whether the appropriate measure of uncertainty varies with the macroeconomic context. Using data provided by the Spanish Survey of Household Finances (EFF) and the Labour Force Survey (LFS) we construct several uncertainty measures commonly used in the literature and an additional indicator based on job insecurity data and estimate different econometric models under the life-cycle/permanent income hypothesis, using these measures of uncertainty. Our results are twofold: first, we find evidence in favour of the precautionary saving hypothesis. Secondly, we find that the sources of uncertainty vary with the business cycle: the job insecurity indicator is an appropriate variable to approximate income uncertainty in any macroeconomic context, especially when the unemployment rate is low. When unemployment soars, however, it becomes the main uncertainty source for households, together with the degree of instability at the current job.

Keywords: precautionary savings; macroeconomic uncertainty; consumption; EFF (search for similar items in EconPapers)
JEL-codes: D12 D14 E21 (search for similar items in EconPapers)
Date: 2016-07-07
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Precautionary saving in Spain during the great recession: evidence from a panel of uncertainty indicators (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72436

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