The Effect of Income Risk on Gross Domestic Saving Rate: A Case Study of Iran

Document Type : Research Paper

Authors

1 Assistant Professor Department of Economics, University of Mazandaran

2 MA of Economics, University of Mazandaran

Abstract

In this research, the effect of risk or uncertainty, as one of the most important variables, on saving has been studied in Iran using the ordinary least squares method over the period of 1980 to 2010. We consider the standard deviation of Gross Domestic Product (GDP) as a proxy for the income risk in order to evaluate the effect of the income risk on the saving rate. The empirical findings of this research indicate a positive and significant effect of the income risk on the gross domestic saving rate. In other words, an increase in uncertainty causes disutility for risk-averse consumers. Consumers reallocate their consumption from the present to the future in order to decrease the disutility. Then, saving increases and it confirms the effect of precautionary motives on saving. Moreover, economic growth, the nominal interest rate on bank deposits, inflation and the ratio of net exports to GDP have positive effects on the saving rate.             

Keywords

Main Subjects

References

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The Journal of Economic Policy
Volume 8, Issue 16
April 2017
Pages 1-19

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