Determinants of Lower Saving Rates in the USA: Prospects and Implications

Magda Kandil

International Journal of Finance & Economics, 2015, vol. 20, issue 4, 328-340

Abstract: The recent episode of the financial meltdown has drawn attention to global imbalances, raising concerns about inability to sustain low saving rates in the USA. The objective of this paper is to shed light on the downward trend in household savings in the USA starting in the mid‐1990s. In addition to the theoretical determinants of household savings, the paper's innovation is in tracing the effect of the widely tracked consumer sentiment index on savings. Applying the dynamic autoregressive distributed lag model with bounds testing approach, the evidence confirms the relevance of the consumer sentiment index as an important factor that affects household savings, both in the short‐run and long‐run.

Date: 2015
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