Premium
Determinants of Lower Saving Rates in the USA: Prospects and Implications
Author(s) -
Kandil Magda
Publication year - 2015
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1519
Subject(s) - economics , distributed lag , index (typography) , econometrics , autoregressive model , lag , dynamic factor , relevance (law) , monetary economics , macroeconomics , computer science , computer network , world wide web , political science , law
The recent episode of the financial meltdown has drawn attention to global imbalances, raising concerns about inability to sustain low saving rates in the USA. The objective of this paper is to shed light on the downward trend in household savings in the USA starting in the mid‐1990s. In addition to the theoretical determinants of household savings, the paper's innovation is in tracing the effect of the widely tracked consumer sentiment index on savings. Applying the dynamic autoregressive distributed lag model with bounds testing approach, the evidence confirms the relevance of the consumer sentiment index as an important factor that affects household savings, both in the short‐run and long‐run.