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What Is behind the Global Jump in Personal Saving during the Pandemic?

Matthew Higgins () and Thomas Klitgaard

No 20210414, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Household saving has soared in the United States and other high-income countries during the COVID-19 pandemic, despite widespread declines in wages and other private income streams. This post highlights the role of fiscal policy in driving the saving boom, through stepped-up social benefits and other income support measures. Indeed, in the United States, Japan, and Canada, government assistance has pushed household income above its pre-pandemic trajectory. We argue that the larger scale of government assistance in these countries helps explain why saving in these countries has risen more strongly than in the euro area. Going forward, how freely households spend out of their newly accumulated savings will be a key factor determining the strength of economic recoveries.

Keywords: income; saving; fiscal policy; pandemic; COVID-19; consumption; U.S.; Euro area; Japan; Canada; transfers; wages; benefits (search for similar items in EconPapers)
JEL-codes: D14 F0 (search for similar items in EconPapers)
Date: 2021-04-14
New Economics Papers: this item is included in nep-mac
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