Private Saving Rates and Macroeconomic Uncertainty: Evidence from Spanish Regional Data

Abstract

The aftermath of the recent financial crisis has been followed by increasing saving rates, which may well reflect precautionary behaviour of households. In spite of a broad agreement on the theoretical implications of uncertainty on saving rates, empirical work has not yet reached a consensus on which is the most reliable measure of uncertainty. In this paper we empirically test the precautionary saving theory and explore different measures of macroeconomic uncertainty, using Spanish regional data for the period 1980-2007. Our results suggest that part of the recent increase in saving rates is related to a precautionary motive and that increased uncertainty causes greater savings rates. Moreover, our results also suggest that, in Spain, the unemployment rate is a relevant variable as a measure of future income uncertainty.