Volatility Trap : Precautionary Saving, Investment, and Aggregate Risk.
Reda. Cherif
Bok Engelsk 2012 · Electronic books.
| Omfang | 1 online resource (23 pages)
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| Utgave | 1st ed.
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| Opplysninger | Cover -- Contents -- Abstract -- Introduction -- II. A "Store-or-Sow" Model of Precautionary Saving and Investment -- III. Results and Implications -- IV. An Empirical Relationship Among Investment, Saving, and Volatility -- V. Concluding Remarks -- Tables -- 1. Saving, Investment, and Volatility: Descriptive Statistics -- 2. Panel Fixed Effects Regressions -- Figures -- 1. Precautionary Saving and the Golden Rule Investment Rate -- 2. A Phase Diagram of Precautionary Saving and Investment Rates -- 3. Precautionary Saving and Investment Rates vs. Volatility of Permanent Shocks -- 4. Precautionary Saving and Investment Rates vs. Volatility of Temporary Shocks -- 5. Saving vs. Investment -- 6. Saving vs. Investment-Saving Ratio -- References -- Appendix Table. Average Investment, Saving, and Volatility (1970-2008).. - We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers invest relatively little. In contrast, low volatility of permanent shocks leads to low precautionary saving and high or low investment, depending on the volatility of temporary shocks. Empirical evidence shows a nonlinear relationship between investment and saving and that investment is a hump-shaped function of the volatility of permanent shocks, as predicted by the model.
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| Dewey | |
| ISBN | 9781475570694
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