Saving and the Long Shadow of Macroeconomic Shocks

33 Pages Posted: 24 May 2013

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics; National Bureau of Economic Research (NBER)

Joshua Aizenman

National Bureau of Economic Research (NBER)

Ilan Noy

Victoria University of Wellington

Date Written: May 2013

Abstract

The global crisis of 2008 raises many questions regarding the long‐term response to crises. We know that households that lost access to credit, for example, were forced to adjust and increase saving. But, will households keep on saving more than they would have done otherwise had the global financial crisis not occurred? And for how long will this increased saving persist? Here, we study the degree to which past adverse income shocks increase the saving rates of affected households. We find evidence consistent with history‐dependent dynamics: more experience of past crises tends to increase household saving. We follow up with an investigation of the importance of historical exposure for current account dynamics, but find no strong indication that our measure of past exposure is important to the current account’s determination. We conclude by estimating the likely impact of the 2008 GFC on future saving.

Suggested Citation

Aizenman, Joshua and Aizenman, Joshua and Noy, Ilan, Saving and the Long Shadow of Macroeconomic Shocks (May 2013). NBER Working Paper No. w19067. Available at SSRN: https://ssrn.com/abstract=2269481

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joshua Aizenman (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ilan Noy

Victoria University of Wellington ( email )

P.O. Box 600
Wellington, 6140
New Zealand

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