Template-Type: ReDIF-Paper 1.0 Series: Tinbergen Institute Discussion Papers Creation-Date: 2012-12-17 Number: 12-144/VI Author-Name: Yvonne Adema Author-Workplace-Name: Erasmus University Rotterdam Author-Name: Lorenzo Pozzi Author-Workplace-Name: Erasmus University Rotterdam Title: Business Cycle Fluctuations and Private Savings in OECD Countries: A Panel Data Analysis Abstract: This discussion paper led to a publication in the 'European Economic Review'. Vol. 79, pages 214-233.
We investigate the cyclicality of the private savings to GDP ratio for a panel of 19 OECD countries over the period 1971-2009. We find robust evidence that the private savings ratio is countercyclical. Three theories unambiguously predict a higher private savings ratio during recessions: a Ricardian offset effect, the presence of credit constraints, and precautionary savings. We find evidence only for the latter theory. Our estimations take into account a large number of econometric complications: persistence in the savings ratio, endogeneity of the regressors, cross-country parameter heterogeneity, cross-sectional dependence, stationarity issues, omitted variables, and instrument strength. Classification-JEL: C23, E21, E32 Keywords: Private Savings, Business Cycles, Ricardian offset, Credit Constraints, Precautionary Savings, Dynamic Panel, Cross-Sectional Dependence File-Url: http://papers.tinbergen.nl/12144.pdf File-Format: application/pdf File-Size: 446119 bytes Handle: RePEc:tin:wpaper:20120144