Consumption puzzles and precautionary savings pdf

This paper shows that precautionary savings can go a long way in making the excessgrowth, excesssmoothness and excesssensitivity features of consumption consistent with the stochastic processes of labor income observed in the u. Precautionary savings, lifecycle and macroeconomics. The spirit of capitalism, precautionary savings, and. Does precautionary savings drive the real interest rate. Ricardo 1990, consumption puzzles and precautionary savings, journal of. This type of saving is called precautionary saving. Although this hypothesis has been tested by a large number of authors, both at macro and micro level, the empirical results are not conclusive, and the main conclusion than can be drawn is that there is neither consensus on the intensity of that motive for saving, nor on the most appropriate measure of uncertainty. Caballero, consumption puzzles and precautionary savings 117 presenting the general framework, it argues that both micro and macro u. Estimating the elasticity of intertemporal substitution taking into account the precautionary savings motive, journal of macroeconomics, elsevier, vol.

Disentangling the importance of the precautionary saving motive1. Cubullero, consumption puzzles and precautionary savings 115 consume even when the predisposition to risk does not change with the level of wealth, as is the case with the exponential utility function used in this paper. In this section we study conditions under which savings react to changes in income uncer tainty. Under reasonable assumptions, the marriage between precautionarysavings. Precautionary saving and consumption fluctuations jstor. Precautionary saving and consumption smoothing across time and possibilities, sciences po publications 3976, sciences po. Precautionary saving munich personal repec archive. We shall not discuss at length many other facets of intertemporal. Consumption puzzles and precautionary savings sciencedirect.

Increased uncertainty generates a positive extra saving, the socalled precautionary saving. The economic importance of precautionary saving rivals that of. Consumption puzzles and precautionary savings core. Citations of consumption puzzles and precautionary savings.

Recall that in the pih, when you abstract from borrowing constraints, certainty equivalence implies that mean preserving spreads of the income distribution do not impact on saving. This paper shows that precautionary savings can go a long way in making the excessgrowth, excesssmoothness and excesssensitivity features of consumption consistent with the stochastic processes. The current study is based on the premise that while precautionary savings. Precautionary saving and consumption smoothing nber.