Changes in household saving and borrowing behavior during the economic crisis

Abstract

In the article the authors use the well-known model of “permanent income” to explain the behavior of Russian households in a situation of economic crisis. The authors challenge the widespread opinion in the Russian economic community that the Russian banking system’s recovery from the crisis caused by the coronavirus epidemic will be quite short and intensive. The almost thirty-year history of economic crises in Russia does not give rise to such optimism. The article provides evidence that during the past economic crises, Russians have always chosen the “savings” model of behaviour. The essence of this model is that at the first obvious symptom of the crisis, which is a reduction in current income (less often a loss of employment), households sharply reduce their current consumption. It is noteworthy that the savings behaviour pattern extends beyond the acute phase of the crisis. A high savings rate is maintained for a long time as the value of current household income has recovered. It is assumed that the savings model has become a stable behavior pattern as a result of the long (about 20 years) period of stagnation of the Russian economy at the turn of the 20th-21st centuries.