Saving Habit

Topics: Investment, Interest, Income Pages: 3 (718 words) Published: October 21, 2011

A. Income
Both the Keynesian savings function [21] and the permanent income hypothesis [11] Indicate a positive effect of income on savings. Using time series data for forty-nine countries, Rossi, for example, indicated the positive impact of current income levels on savings rate without differentiating types of income [32]. According to the permanent income hypothesis [11], which distinguishes between permanent and transitory components of income, households will spend mainly the permanent income and therefore the transitory income will immediately be channeled to savings with marginal propensity of savings from this income approaching unity. (Differences in household savings behavior:

Evidence from industrial and Developing countries
Gulnur muradoglu
Fatma taskin)

B. Wealth
Different definitions of wealth are used in the literature depending upon the different Assumptions regarding the formation of expectations about consumption [33]. Still, wealth is expected to have a negative effect on savings through the reduction of savings out of permanent income [5]. As in the case of the Schmidt-Hebbel, Webb, and Corsetti study [34], this study also adopted the view that monetary asset holdings can be used to measure wealth both because monetary assets lessen the dependence on current income, especially when it declines temporarily, and the data for monetary assets are available on a comparable basis for all countries in the sample. (Differences in household savings behavior:

Evidence from industrial and Developing countries
Gulnur muradoglu
Fatma taskin)

In most industrial countries, revaluations of equities and housing have contributed to a substantial increase in the value of household net worth through most of the 1980s and 1990s, reducing the need for saving out of personal income. Empirical studies generally support the view that wealth is an important variable in explaining long-run movements in personal saving...
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