COVID-19 and the increase in household savings: precautionary or forced?

Maarten Dossche and Stylianos Zlatanos

Economic Bulletin Boxes, 2020, vol. 6

Abstract: In response to COVID-19 the euro area household saving rate reached unprecedented levels in the first half of 2020. First, lockdown measures prohibited households from consuming a large share of their normal expenditure basket, leading to forced savings. Second, the sudden outbreak of the pandemic caused the risk of future unemployment to shoot up, leading to precautionary savings. Using a parsimonious panel model this box finds that forced savings have been the main driver of the recent spike in household savings. Despite these accumulated savings, however, households remain cautious about their future spending. JEL Classification: E21, E32

Keywords: business cycle fluctuations; Consumption (search for similar items in EconPapers)
Date: 2020-09
Note: 3577821
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Citations: View citations in EconPapers (22)

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