Estimating a Precautionary Saving Motive under Consumption Uncertainty (in Korean)

Jin-tae Hwang () and Sung-min Kim ()
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Jin-tae Hwang: Department of Economics, Daegu University
Sung-min Kim: School of Economics & Trade, Kyungpook National University

Economic Analysis (Quarterly), 2020, vol. 26, issue 3, 48-70

Abstract: Using data from the Household Income and Expenditure Survey over the period 1994-2016, we estimate the coefficient of relative prudence in order to capture precautionary saving motive. To do this, we adopt a cohort approach, where we transform such microdata into sample cohort means. Together with initial income involving liquidity constraint, we estimate the relative prudence derived from the Euler equation. The two-stage least-squares (2SLS) between estimate of it obtained from the cohort panel data analysis is too small for the existence of precautionary saving motive, as in previous studies, while the 2SLS random effects estimate is so reasonable. Moreover, the liquidity-constrained cohorts tend to be more sensitive to uncertainty, relative to the unconstrained ones.

Keywords: Consumption growth; Precautionary saving motive; Relative prudence; Liquidity constraint; Sample cohort means (search for similar items in EconPapers)
JEL-codes: D12 D14 D81 E10 E21 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:bok:journl:v:26:y:2020:i:3:p:48-70

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