IMF Economic Review

, Volume 60, Issue 1, pp 114–138 | Cite as

Precautionary Savings in the Great Recession

  • Ashoka Mody
  • Franziska Ohnsorge
  • Damiano Sandri


Heightened uncertainty since the onset of the Great Recession has materially increased saving rates, contributing to lower consumption and GDP growth. Consistent with a model of precautionary savings in the face of uncertainty, the paper finds for a panel of advanced economies that greater labor income uncertainty is significantly associated with higher household savings. These results are robust to controlling for other determinants of saving rates, including wealth-to-income ratios, the government fiscal balance, demographics, credit conditions, and global growth and financial stress. The estimates imply that at least two-fifths of the sharp increase in household saving rates between 2007 and 2009 can be attributed to the precautionary savings motive.

JEL Classifications

E12 E32 F32 F43 


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Copyright information

© International Monetary Fund 2012

Authors and Affiliations

  • Ashoka Mody
  • Franziska Ohnsorge
  • Damiano Sandri

There are no affiliations available

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