Dynamics of Household Savings and Consumption in the Euro Area
Dynamics of Household Savings and Consumption in the Euro Area

Summary/Abstract: In this paper, we are looking for an answer to the long-standing question how the households tend to distribute their income between consumption and savings. We have decided to analyse householder behaviour in the euro area using quarterly data for euro area countries over the time horizon 2000 – 2018 to estimate marginal propensity to consume, marginal propensity to save, and to compare the saving dynamics with monetary policy and country wealth. We first considered panel regression model estimated using Arellano-Bond estimator for aggregate euro area level. This model was altered by an autoregressive time series model applying the Newey-West standard errors for individual countries. The results show that the Global Financial Crisis was an important break-even in saving habits of European households. Finally, we have identified four country groups based on the relationship between the economic performance of euro area countries and saving habits of households.

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