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The Effects of Consumption Variability on Saving: Evidence from a Panel of Muscovite Households**
Author(s) -
Guariglia Alessandra,
Kim ByungYeon
Publication year - 2003
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.t01-1-00049
Subject(s) - economics , consumption (sociology) , estimator , econometrics , panel data , estimation , precautionary savings , exploit , construct (python library) , statistics , monetary economics , mathematics , computer science , social science , sociology , management , computer security , market liquidity , programming language
Due to the high uncertainty characterizing them, transition economies provide an extraordinary opportunity to test the precautionary saving hypothesis. This paper represents an attempt to exploit this opportunity. We use a panel of 2,346 Muscovite households, over the 12 months of 1996, to construct two time‐varying measures of consumption growth variability, which we use as proxies for households’ perceived uncertainty. We then regress household saving on these uncertainty variables using a GMM‐system estimator. We find that both uncertainty measures generally have a positive and statistically significant effect on saving. This result, which is robust to the use of different measures of saving, supports the precautionary saving hypothesis.