The Vanishing Savings Motive

Keuschnigg, Christian (June 1993) The Vanishing Savings Motive. Former Series > Forschungsberichte / Research Memoranda 326


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Abstract: When the production sector of a small open economy with an internationally determined interest rate adjusts gradually to some exogenous shocks, then during a transitional period wage income also does. The paper argues that slowly falling (increasing) wages create transitory life-cycle savings (dis-)incentives which vanish in the long-run when wages become stationary again. Such a transitory life-cycle savings component comes on top of a base component created by the permanently operating long-run savings incentives, and it easily gives rise to non-monotonic adjustment of assets. Assets may even move first in a direction that is opposite to the implied long-run changes.;

Item Type: IHS Series
Classification Codes (e.g. JEL): D91, E21
Date Deposited: 26 Sep 2014 10:35
Last Modified: 01 Apr 2016 14:09

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