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The Volatility Trap : Precautionary Saving, Investment, and Aggregate Risk / Reda Cherif, Fuad Hasanov.
- Format:
- Book
- Government document
- Author/Creator:
- Cherif, Reda.
- Series:
- IMF Working Papers; Working Paper ; No. 2012/134
- IMF Working Papers
- Language:
- English
- Subjects (All):
- Risk.
- Saving and investment.
- Physical Description:
- 1 online resource (23 p.)
- Edition:
- 1st ed.
- Place of Publication:
- Washington, D.C. : International Monetary Fund, 2012.
- Language Note:
- English
- Summary:
- We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers invest relatively little. In contrast, low volatility of permanent shocks leads to low precautionary saving and high or low investment, depending on the volatility of temporary shocks. Empirical evidence shows a nonlinear relationship between investment and saving and that investment is a hump-shaped function of the volatility of permanent shocks, as predicted by the model.
- Contents:
- Cover; Abstract; Contents; Introduction; II. A "Store-or-Sow" Model of Precautionary Saving and Investment; III. Results and Implications; Figures; 1. Precautionary Saving and the Golden Rule Investment Rate; 2. A Phase Diagram of Precautionary Saving and Investment Rates; 3. Precautionary Saving and Investment Rates vs. Volatility of Permanent Shocks; 4. Precautionary Saving and Investment Rates vs. Volatility of Temporary Shocks; IV. An Empirical Relationship Among Investment, Saving, and Volatility; Tables; 1. Saving, Investment, and Volatility: Descriptive Statistics
- 5. Saving vs. Investment6. Saving vs. Investment-Saving Ratio; V. Concluding Remarks; 2. Panel Fixed Effects Regressions; References; Appendix Table. Average Investment, Saving, and Volatility (1970-2008)
- Notes:
- Description based upon print version of record.
- Includes bibliographical references.
- Description based on print version record.
- ISBN:
- 9781475518870
- 1475518870
- 9781475570694
- 1475570694
- OCLC:
- 870244916
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