The protective role of saving: Bayesian analysis of British panel data

Sarah Brown (), Pulak Ghosh, Bhuvanesh Pareek and Karl Taylor

Journal of Empirical Finance, 2021, vol. 63, issue C, 57-72

Abstract: We explore whether a protective role for savings against future financial hardship exists using household level panel data for a nationally representative sample of UK households. We jointly model the incidence and extent of financial problems, using a dynamic two-part approach allowing different data-generating processes for experiencing financial hardship and the extent of financial hardship experienced. Our results show that: (i) saving on a regular basis mitigates against the likelihood of experiencing, as well as the number of, future financial problems; (ii) state dependence in financial problems exists; (iii) interdependence exists between financial problems and housing costs, with higher housing costs associated with an increased probability of experiencing financial hardship.

Keywords: Bayesian modelling; Financial hardship; Saving; Zero inflation (search for similar items in EconPapers)
JEL-codes: C11 D12 D14 R20 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:63:y:2021:i:c:p:57-72

DOI: 10.1016/j.jempfin.2021.05.002

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