 The consumption impulse from pandemic savings ‒ does the composition matter?Niccolò Battistini, Virginia Di Nino and Johannes Gareis Economic Bulletin Boxes, 2023, vol. 4 Abstract: Since the outbreak of the pandemic, households in the euro area and the United States have accumulated a remarkable stock of savings, which exceeds the pre-pandemic trend and provides a boost to private consumption. This box documents how, in the euro area, the stock of excess savings is mainly held in illiquid assets, which are not readily available for consumption. It also shows that, despite some differences in the euro area and the United States, excess savings are concentrated among wealthy individuals, who generally have a lower marginal propensity to consume. Using a calibrated general equilibrium model with heterogeneous agents, the box shows that the consumption impulse from the immediate use of such excess savings is dampened by the anticipation of a future expansion in demand, as households smooth their consumption patterns over time. Overall, the results suggest that the consumption impulse from excess savings accumulated during the pandemic has declined in both economies since the second half of 2021 and has been lower in the euro area compared with the United States. JEL Classification: E21, E44, E52 Keywords: Consumption; excess savings; monetary policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbbox:2023:0004:1 Access Statistics for this article More articles in Economic Bulletin Boxes from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC. |
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