1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Explaining Household Saving Rates in G7 Countries

Implications for Germany

Many propositions have been made to explain the increase in the German household saving rate since the year 2000 from an individual country perspective but most of them focus on partial aspects. This paper adds to the discussion by analysing whether factors common to other industrial countries help to explain the behaviour of the German household saving rate. We analyse the determinants of household saving rates in the G7 countries since the 1970s in a panel co-integration framework. Unlike many previous studies, our specification allows for heterogeneity in the long- and short-run parameters across countries and explicitly distinguishes between financial liberalisation effects and wealth effects. Apart from finding that income developments as well as real interest rates and inflation are influencing household savings in most countries, results suggest that wealth effects through house and stock prices play a role in many countries, notably over the more recent period. According to the model, the recent increase in the German saving rate is due to two factors: Firstly, the actual saving rate was below its estimated equilibrium level at the end of the 1990s, implying an upward correction over the medium term. Secondly, the equilibrium saving rate has moved upwards in the first half of the 2000s, largely because of declines in stock prices.

English

Keywords: household saving rate, wealth effects, panel co-integration
JEL: E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption; Saving; Wealth; C33: Mathematical and Quantitative Methods / Multiple or Simultaneous Equation Models; Multiple Variables / Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error