Working Paper: NBER ID: w19067
Authors: Joshua Aizenman; Ilan Noy
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.
Keywords: saving; macroeconomic shocks; household behavior
JEL Codes: E21; F32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| past adverse income shocks (G59) | current household saving rates (D14) |
| past crises (H12) | increased household saving rates (D14) |
| past income shocks (E25) | increased precautionary saving behaviors (D14) |
| exposure index (C43) | household saving (D14) |
| exposure index (C43) | private sector saving (D14) |