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This chapter examines the volume of domestic savings; its sources (e.g., personal/household, business, and the government); and the use of mobilized domestic savings to finance the growing investment needs of the country. Since personal/household saving is largely determined by the level and distribution of income, wealth, and people's propensity to save, these factors are evaluated for different income groups and occupations, and business profits and dividend payments upon which business savings largely depend on are examined. The chapter also analyzes the channels into which personal/household savings are funneled, the significance of owners' equity financing, and business saving. Since business saving depends on business profits, the factors that contribute to profits as well as their primary beneficiaries are examined. The sources of government revenues, public saving, and the role of the government in capital formation are investigated.

This chapter discusses the basic determinants of the generation of wealth and its distribution across households; it has four sections. Section 7.1 considers the life cycle motive as a basis of household saving behaviour, paying particular attention to the role played by the pension annuity system. Section 7.2 discusses the role of education in transmitting wealth between parents and children. Section 7.3 turns to the topic of macroeconomics and looks at how the rate of return is determined in the long term, thereby showing how the theoretical discussions in this book form a general equilibrium framework. Section 7.4 takes up the question of asset and related expectations––asset price fluctuation is considered one of the major causes of generation of huge wealth in the short term, but there are various conflicting dimensions to this problem.

This chapter presents data on saving rates and related variables in China, and conducts an econometric analysis of the determinants of the household saving rate using a life cycle model and panel data on Chinese provinces for the 1995-2004 period. The chapter is organized as follows: Section 14.2 reviews previous literature. Section 14.3 discusses the theoretical link between the age structure of the population and the household saving rate. Section 14.4 presents data on saving rates and related variables. Section 14.5 discusses the estimation model and data sources. Section 14.6 discusses the estimation method. Section 14.7 presents estimation results.

This chapter examines the high savings rate in China, beginning with an overview of the major trends in Chinese national saving in the past three decades. Drawing data from the World Development Indicators, China's Flow of Funds Accounts, and other sources of aggregate statistics, it compares the aggregate saving in China with that of representative economies and major country groups. The chapter then considers the factors behind the rising savings of the government, corporate, and household sectors, focusing on the period of 1999 to 2007. A commentary is included at the end of the chapter.

This chapter examines the factors that influence the saving behavior of an individual. It suggests that the decision to save rather than to spend a portion of income is in effect a decision to consume in the future rather than in the present and that this intertemporal choice can be analyzed using a budget constraint and indifference curves relating to present and future consumption. Evidence from the US indicates that an increase in real interest rates reduces borrowing and it has a small but positive net effect on aggregate household saving. This chapter also provides several relevant computational exercises and solutions.

The saving rate in China is high by historical and international norms. The high saving rate has funded capital accumulation which in turn has been the primary driver of China’s economic growth. This chapter reviews the evidence on Chinese household saving and conduct a small study to assess the importance of the precautionary motive for saving.

Using administrative credit report records and data collected through several special household surveys we analyze changes in household debt and savings during the 2007 recession. We find that while different segments of the population were affected in distinct ways, depending on whether they owned a home, whether they owned stocks and whether they had secure jobs, the crisis’ impact appears to have been widespread, affecting large shares of households across all age, income and education groups. In response to their deteriorated financial situation, households reduced their average spending and increased saving. The latter increase – at least in 2009 – did not materialize itself through an increase in contributions to retirement and savings accounts. If anything, such contributions actually declined on average during that year. Instead, the higher saving rate appears to reflect a considerable decline in household debt, with households paying down mortgage debt in particular. At the end of 2009 individuals expected to continue to increase saving and pay down debt, which is consistent with what we have observed so far in 2010. In contrast, consumers were pessimistic about the availability of credit, with credit expected to become harder to obtain during 2010.

This chapter examines the effect of interest rates on consumption in Japan and explains why monetary transmission via Japan’s household sector is significantly different from that operating in the United States and other industrial countries. It presents an empirical analysis of Japanese consumption and household saving behavior, and explores the role of the household sector in the monetary transmission mechanism in Japan. Using models for aggregate consumption based more on the solved out consumption function approach than the Euler equation approach, the chapter looks at income growth and income uncertainty, along with the role of housing wealth, demography, and residential land prices.

In 2009, the Federal Reserve Board implemented a survey of families that participated in the 2007 Survey of Consumer Finances (SCF) to gain detailed information on the effects of the recent recession on all types of households. Using data from the 2007–09 SCF panel, we highlight the variation in households’ financial experiences by examining the distribution of changes in families’ balance sheets. Further, we use information on changes in families’ saving, investing, and spending behavior to consider the potential longer-term consequences of the current recession on households’ finances and decisions. Most families experienced a decline in wealth between 2007 and 2009, but many families saw only small changes on net, and others saw substantial increases in wealth. This pattern of gains and losses typically holds within demographic groups. Changes in families’ wealth over the period appear to reflect changes in asset values (particularly the value of homes, stocks, and businesses) rather than changes in the level of ownership of assets and debts or in the amount of debt held. On the whole, families appear more cautious in 2009 than in 2007, as most families reported greater desired buffer savings, and many expressed concern over future income and employment.