Public and Private Saving and the Long Shadow of Macroeconomic Shocks

Joshua Aizenman, Ilan Noy

NBER Working Paper No. 19067
Issued in May 2013
NBER Program(s):   EFG   IFM

The global crisis of 2008-9 and the ongoing Euro crisis raise many questions regarding the long-term response to crises. We know that households that lost access to credit, for example, were forced to adjust and increase saving. But, will households remain bigger savers than they would have been had the global financial crisis not occurred? And for how long will this increased saving persist? We also ask similar questions about the public sector 's saving decisions. We hypothesize that it is only dramatic shocks that have a long-lasting effect on saving behavior. For a sample of 23 high-income countries, we examine the impact of catastrophic shocks from 1900 onward (defined as a time period in which the cumulative decline in per capita income was larger than 10 percentage points) on patterns of saving during 1980-2010. We find evidence consistent with history-dependent dynamics: more experience of past crises tends to increase savings among households, but lead to decreased public sector saving. This decrease in public saving, however, is about 1/3 in magnitude than the corresponding increase in private/household saving. We follow up on these findings with an investigation of the importance of historical exposure for current account dynamics, but find no strong indication that our measure of past exposure is important to the current account 's determination. We conclude by examining the likely impact of the 2008-9 GFC on future saving.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19067

Users who downloaded this paper also downloaded these:
Christopoulou and Lillard w19036 Is Smoking Behavior Culturally Determined? Evidence from British Immigrants
Bruno and Shin w19084 Assessing Macroprudential Policies: Case of Korea
Aizenman and Noy w18527 Macroeconomic Adjustment and the History of Crises in Open Economies
Spolaore w19122 What is European Integration Really About? A Political Guide for Economists
Heckman and Raut w19077 Intergenerational Long Term Effects of Preschool - Structural Estimates from a Discrete Dynamic Programming Model
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us