EconPapers    
Economics at your fingertips  
 

Keep calm and consume? Subjective uncertainty and precautionary savings

Barbara Broadway () and John P. Haisken-DeNew ()
Additional contact information
Barbara Broadway: University of Melbourne
John P. Haisken-DeNew: University of Melbourne

Authors registered in the RePEc Author Service: John P. de New

Journal of Economics and Finance, 2019, vol. 43, issue 3, No 3, 505 pages

Abstract: Abstract This paper estimates the effect of income uncertainty on assets held in accounts and cash, and finds substantial empirical evidence for precautionary savings. Using household-level panel data, it explicitly distinguishes between ‘real’ income uncertainty the household is actually exposed to, and ‘perceived’ income uncertainty. It finds that the latter substantially increases precautionary savings above and beyond the effect of ‘real’ income uncertainty. The effect of subjective economic uncertainty on behaviour has only begun to show up after the Great Recession. The economic crisis appears to have shifted households’ willingness to forgo current consumption for insurance pruposes. Our results imply that households save above their optimal level especially after and during a crisis, potentially exacerbating the economic downturn.

Keywords: Subjective uncertainty; Precautionary savings; HILDA; CASiE (search for similar items in EconPapers)
JEL-codes: D14 D84 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://link.springer.com/10.1007/s12197-018-9451-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Keep Calm and Consume? Subjective Uncertainty and Precautionary Savings (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jecfin:v:43:y:2019:i:3:d:10.1007_s12197-018-9451-0

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/12197/PS2

DOI: 10.1007/s12197-018-9451-0

Access Statistics for this article

Journal of Economics and Finance is currently edited by James Payne

More articles in Journal of Economics and Finance from Springer, Academy of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2025-03-30
Handle: RePEc:spr:jecfin:v:43:y:2019:i:3:d:10.1007_s12197-018-9451-0