Abstract
Abstract The aggregate saving indicator does not directly reflect changes in individuals’ microeconomic behavior. From the official statistics’ point of view, households choose between spending, which generates additional income and consumption in the economy, and setting money aside, which does not. Formally, households may not (if the authors disregard housing investment) choose to save, because the aggregate saving statistical indicator is a residual concept defined as the ensuing difference between aggregate disposable income and consumption. It measures the change in net worth, which, in a closed economy, may only be generated by the production of capital goods and an increase in inventories. Using an agent-based model, the authors show that shocks unrelated to structural changes in households’ behavior may generate positively correlated fluctuations in the aggregate saving rate, productivity growth and lending. Meanwhile, a genuine increase in the average individual propensity to save is not necessarily associated with a higher aggregate saving rate.
Highlights
Saving plays many different roles in economics
The observed correlation between financial and aggregate saving rates is meant to provide empirical confirmation of this proposition. We believe that such an interpretation has the potential to be misleading and call for caution in using aggregate national accounts to analyze microeconomic developments
Aggregate saving indicator that is reported in official statistics does not directly measure individuals’ average propensity to save from their income
Summary
Saving plays many different roles in economics. Depending on the school of thought, its fluctuations may be regarded as a core driver of long-term economic development, an indication of aggregate demand cycles or a key source of global imbalances. We believe that the application of such economic intuition is seriously impeded by the apparent conceptual discrepancy between aggregate saving measures and individuals’ average propensity to save out of their income. In comprehensive surveys Deaton (1992), Browning and Lusardi (1996) and Attanasio (1999) point out that only under demanding assumptions may the aggregate version of the consumption/saving indicators match the microeconomic form and stress that micro-founded theories should be tested using micro data We contribute to this discussion by employing an agent-based model.
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