Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/49434
Authors: 
Beznoska, Martin
Ochmann, Richard
Year of Publication: 
2010
Series/Report no.: 
DIW Discussion Papers 1046
Abstract: 
This paper empirically investigates the effects of changes in the interest rate as well as transitory income uncertainty on households' consumption-savings decision. Applying a structural demand model to German survey data, we estimate the uncompensated interest rate elasticity for savings, in line with the literature, to around zero. Accordingly, any policy-induced variation of net returns to savings is expected to have no significant effects on the level of savings. Moreover, we find significant effects of precautionary savings on the consumption-savings decision. As a result of a doubling of transitory income uncertainty, an average household increases savings by 4:4%. These effects vary by household composition and social status.
Subjects: 
Consumption-savings decision
interest rate elasticity of savings
income uncertainty
JEL: 
D12
D91
E21
Document Type: 
Working Paper

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