Author:
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Category :
Languages : en
Pages :
Book Description
Liquidity Constraints and Precautionary Saving
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Liquidity Constraints and Precautionary Saving
Author: Chris Carroll
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 40
Book Description
Economists working with numerical solutions to the optimal consumption/saving problem under uncertainty have long known that there are quantitatively important interactions between liquidity constraints and precautionary saving behavior. This paper provides the analytical basis for those interactions. First, we explain why the introduction of a liquidity constraint increases the precautionary saving motive around levels of wealth where the constraint becomes binding. Second, we provide a rigorous basis for the oft-noted similarity between the effects of introducing uncertainty and introducing constraints, by showing that in both cases the effects spring from the concavity in the consumption function which either uncertainty or constraints can induce. We further show that consumption function concavity, once created, propagates back to consumption functions in prior periods. Finally, our most surprising result is that the introduction of additional constraints beyond the first one, or the introduction of additional risks beyond a first risk, can actually reduce the precautionary saving motive, because the new constraint or risk can hide' the effects of the preexisting constraints or risks
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 40
Book Description
Economists working with numerical solutions to the optimal consumption/saving problem under uncertainty have long known that there are quantitatively important interactions between liquidity constraints and precautionary saving behavior. This paper provides the analytical basis for those interactions. First, we explain why the introduction of a liquidity constraint increases the precautionary saving motive around levels of wealth where the constraint becomes binding. Second, we provide a rigorous basis for the oft-noted similarity between the effects of introducing uncertainty and introducing constraints, by showing that in both cases the effects spring from the concavity in the consumption function which either uncertainty or constraints can induce. We further show that consumption function concavity, once created, propagates back to consumption functions in prior periods. Finally, our most surprising result is that the introduction of additional constraints beyond the first one, or the introduction of additional risks beyond a first risk, can actually reduce the precautionary saving motive, because the new constraint or risk can hide' the effects of the preexisting constraints or risks
Soft Liquidity Constraints and Precautionary Saving
Author: Emilio Fernandez-Corugedo
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 38
Book Description
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 38
Book Description
Soft Liquidity Constraints and Precautionary Saving
Author: Emilio Fernández Corugedo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This paper considers the implications for consumption and saving behaviour when households are allowed to borrow, but face penalties which increase with the amount borrowed. It shows that the introduction of this type of constraints (soft liquidity constraints) does not lead to consumers behaving very differently from consumers who face constraints which prevent them from borrowing at any time (hard liquidity constraints). However, when hard constraints are relaxed and become soft, the amount of precautionary saving falls.
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This paper considers the implications for consumption and saving behaviour when households are allowed to borrow, but face penalties which increase with the amount borrowed. It shows that the introduction of this type of constraints (soft liquidity constraints) does not lead to consumers behaving very differently from consumers who face constraints which prevent them from borrowing at any time (hard liquidity constraints). However, when hard constraints are relaxed and become soft, the amount of precautionary saving falls.
On Aggregate Precautionary Saving
Author: Mark Huggett
Publisher:
ISBN:
Category : Saving and investment
Languages : en
Pages : 40
Book Description
Publisher:
ISBN:
Category : Saving and investment
Languages : en
Pages : 40
Book Description
Income Uncertainty, Liquidity Constraints, and the Option Value of Saving
Author: Cristiń Echeverría
Publisher:
ISBN:
Category :
Languages : en
Pages : 202
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages : 202
Book Description
Essays on Liquidity Constraints, Aggregation, and the Permanent-income Hypothesis
Author: Xiaonian Xu
Publisher:
ISBN:
Category :
Languages : en
Pages : 260
Book Description
Publisher:
ISBN:
Category :
Languages : en
Pages : 260
Book Description
Saving and Liquidity Constraints
Author: Angus Deaton
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 38
Book Description
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 38
Book Description
Disentangling the Importance of the Precautionary Saving Motive
Author: Arthur B. Kennickell
Publisher:
ISBN:
Category : Saving and investment
Languages : en
Pages : 80
Book Description
We assess the importance of the precautionary saving motive by relying on a direct question about precautionary wealth from the 1995 and 1998 waves of the Survey of Consumer Finances. In this survey, a new question has been designed to elicit the amount of desired precautionary wealth. This allows us to bound the amount of precautionary accumulation and to overcome many of the problems of previous works on this topic. We find that a precautionary saving motive exists and affects virtually every type of household. Even though this motive does not give rise to large amounts of wealth for young and middle-age households, it is particularly important for two groups: older households and business owners. Overall, we provide strong evidence that we need to take the precautionary saving motive into account when modeling saving behavior.
Publisher:
ISBN:
Category : Saving and investment
Languages : en
Pages : 80
Book Description
We assess the importance of the precautionary saving motive by relying on a direct question about precautionary wealth from the 1995 and 1998 waves of the Survey of Consumer Finances. In this survey, a new question has been designed to elicit the amount of desired precautionary wealth. This allows us to bound the amount of precautionary accumulation and to overcome many of the problems of previous works on this topic. We find that a precautionary saving motive exists and affects virtually every type of household. Even though this motive does not give rise to large amounts of wealth for young and middle-age households, it is particularly important for two groups: older households and business owners. Overall, we provide strong evidence that we need to take the precautionary saving motive into account when modeling saving behavior.
The Volatility Trap
Author: Reda Cherif
Publisher: International Monetary Fund
ISBN: 1475570694
Category : Business & Economics
Languages : en
Pages : 41
Book Description
We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers invest relatively little. In contrast, low volatility of permanent shocks leads to low precautionary saving and high or low investment, depending on the volatility of temporary shocks. Empirical evidence shows a nonlinear relationship between investment and saving and that investment is a hump-shaped function of the volatility of permanent shocks, as predicted by the model.
Publisher: International Monetary Fund
ISBN: 1475570694
Category : Business & Economics
Languages : en
Pages : 41
Book Description
We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers invest relatively little. In contrast, low volatility of permanent shocks leads to low precautionary saving and high or low investment, depending on the volatility of temporary shocks. Empirical evidence shows a nonlinear relationship between investment and saving and that investment is a hump-shaped function of the volatility of permanent shocks, as predicted by the model.