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Unemployment Risk and Consumption: Can the Buffer Stock Saving Behavior Explain the Japanese Experience?

Masayuki Keida, Takashi Unayama () and Katsunori Yamada
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Masayuki Keida: Graduate School of Economics, University of Tokyo
Katsunori Yamada: Graduate School of Economics, Kyoto University

No 595, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This paper showed that the drop of propensity to consume in Japan during the lost decade is attributable to increase of income risks, mainly due to rises in unenployment rate/ To asses the impacts of income risks, we used the buffer stock saving model and a numerical method. The buffer stock saving model has put aside effects of income risks on propensity to consume, while it stresses on determination of the target wealth. On the other hand, we focused on dynamics of propensity to consume in response to increases ofincome risks with explicit consideration of wealth distribution dynamics.

Keywords: Income Risk; Japanese Household Consumption; Precautionary Saving (search for similar items in EconPapers)
JEL-codes: D91 E21 E27 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004-08
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