Re-Examining the Decline in the US Saving Rate: The Impact of Mortgage Equity Withdrawal

28 Pages Posted: 13 Aug 2012

See all articles by Guglielmo Maria Caporale

Guglielmo Maria Caporale

Brunel University London - Department of Economics and Finance; London South Bank University; CESifo (Center for Economic Studies and Ifo Institute); German Institute for Economic Research (DIW Berlin)

Mauro Costantini

ISAE, Istituto di Studi e Analisi Economica

Antonio Paradiso

Ca Foscari University of Venice - Dipartimento di Economia

Multiple version iconThere are 2 versions of this paper

Date Written: August 2012

Abstract

In this paper we examine the role of mortgage equity withdrawal in explaining the decline of the US saving rate, since when house prices rise and mortgage rates are low, homeowners have an incentive to withdraw housing equity and this may affect the saving rate. We estimate a Vector Error Correction (VEC) model including the saving rate, asset prices, equity withdrawal and interest rates and find that indeed mortgage equity withdrawal is a key determinant of the observed saving pattern.

Keywords: Saving rate, Mortgage equity withdrawal, Asset prices, Mortgage rates, Vector Error Correction, Impulse response analysis

JEL Classification: C32, E21, O51

Suggested Citation

Caporale, Guglielmo Maria and Costantini, Mauro and Paradiso, Antonio, Re-Examining the Decline in the US Saving Rate: The Impact of Mortgage Equity Withdrawal (August 2012). DIW Berlin Discussion Paper No. 1232. Available at SSRN: https://ssrn.com/abstract=2128563 or http://dx.doi.org/10.2139/ssrn.2128563

Guglielmo Maria Caporale (Contact Author)

Brunel University London - Department of Economics and Finance ( email )

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HOME PAGE: http://www.brunel.ac.uk/about/acad/bbs/bbsstaff/ef_staff/guglielmocaporale/

London South Bank University ( email )

Centre for Monetary and Financial Economics
London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Mauro Costantini

ISAE, Istituto di Studi e Analisi Economica ( email )

Piazza dell' Indipendenza 4
I-00185
Italy

Antonio Paradiso

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

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