U.S. Household Wealth and Saving: The Micro Story Behind the Macro Dynamics (International Monetary Fund, Selected Issues Paper for the United States, August 2, 2012), joint with Oya Celasun, Daniel Cooper, Jihad Dagher
Aggregate savings statistics reveal little about the types of households that drove down the U.S. saving rate before the 2008 crisis and its subsequent recovery. Using PSID micro data, this paper demonstrates that households with consistently lower income growth in the years prior to the crisis experienced larger declines in their saving rates and a larger rise in their indebtedness before the crisis, contributing significantly to the dynamics of the mean saving rate. Households with a larger share of total assets in housing and higher debt-to-income ratios raised their saving rates more sharply after the crisis, from depressed levels. The findings indicate that groups whose balance sheets were more adversely affected by the housing bust have made limited progress in rebuilding their net worth through active savings, suggesting that in the absence of asset price appreciation these households may wish to save more in the future.
Aggregate savings statistics reveal little about the types of households that drove down the U.S. saving rate before the 2008 crisis and its subsequent recovery. Using PSID micro data, this paper demonstrates that households with consistently lower income growth in the years prior to the crisis experienced larger declines in their saving rates and a larger rise in their indebtedness before the crisis, contributing significantly to the dynamics of the mean saving rate. Households with a larger share of total assets in housing and higher debt-to-income ratios raised their saving rates more sharply after the crisis, from depressed levels. The findings indicate that groups whose balance sheets were more adversely affected by the housing bust have made limited progress in rebuilding their net worth through active savings, suggesting that in the absence of asset price appreciation these households may wish to save more in the future.