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Konjunkturinstitutet - National Institute of Economic Research Working Papers, Konjunkturinstitutet - National Institute of Economic Research

No 58:
The Effect of Precautionary Saving on Consumption in Sweden

Johan Lyhagen

Abstract: Uncertainty concerning future income lowers consumption. This is often called the precautionary demand for savings. In this paper the existence of precautionary saving is investigated using Swedish data for the years 1973-1992. As there are no variables for consumers' uncertainty we use proxies. Assuming different underlying distributions of attitudinal data we have a set of variance series. Including the proxies in different specifications of the consumption function, indication of precautionary saving can be found. No uncertainty would raise consumption by 4.9%.

Keywords: Precautionary saving; consumption; uncertainty; econometric modelling; cointegration.; (follow links to similar papers)

JEL-Codes: C32; E21; (follow links to similar papers)

26 pages, December 1, 1997

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