A new interpretation of the condition for precautionary saving in the presence of an interest-rate risk

Magnani, Marco

doi:10.1007/s00712-016-0496-2

Cited by 12 publications

(6 citation statements)

References 17 publications

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“…We define a new notion of possibilistic precautionary saving and we characterize its positivity in terms of relative prudence index. This result can be regarded as a possibilistic variant of Rothschild and Stiglitz theorem from [22], [20].…”

Section: Introductionmentioning

confidence: 82%

The interest rate for saving as a possibilistic risk

Georgescu¹,

Kinnunen

2020

Physica A: Statistical Mechanics and its Applications

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In the paper there is studied an optimal saving model in which the interest-rate risk for saving is a fuzzy number. The total utility of consumption is defined by using a concept of possibilistic expected utility. A notion of possibilistic precautionary saving is introduced as a measure of the variation of optimal saving level when moving from a sure saving model to a possibilistic risk model. A first result establishes a necessary and sufficient condition that the presence of a possibilistic interest-rate risk generates an extra-saving. This result can be seen as a possibilistic version of a Rothschilld and Stiglitz theorem on a probabilistic model of saving. A second result of the paper studies the variation of the optimal saving level when moving from a probabilistic model (the interest-rate risk is a random variable) to a possibilistic model (the interest-rate risk is a fuzzy number).Keywords: possibilistic models of saving, possibilistic expected theory, interest rate risk for saving, possibilistic precautionary saving

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Section: Introductionmentioning

confidence: 82%

The interest rate for saving as a possibilistic risk

Georgescu¹,

Kinnunen

2020

Physica A: Statistical Mechanics and its Applications

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“…The other two results (Theorem 7.2 and 7.4 ) will be registered in the research stream from Sandmo ( 1970 ), Rothschild and Stiglitz ( 1971 ), Eeckhoudt et al. ( 2005 ) and Magnani ( 2017 ): the generation of extra-saving by adding a (probabilistic or possibilistic) interest-rate risk holds if and only if the (partial) relative prudence index is greater than 2.…”

Section: Generalized Precautionary Savingmentioning

confidence: 91%

“…The labor income risk and the interest-rate risk appear as separate risks also in Eeckhoudt and Schlesinger ( 2008 ) where there are analyzed the effects of the n -th-order changes on the optimal saving. The paper Magnani ( 2017 ) contains a new proof of the Rothschild and Stiglitz theorem from Rothschild and Stiglitz ( 1971 ), as well as its new interpretation.…”

Section: Introductionmentioning

confidence: 99%

Mixed models for optimal saving with labor income risk and interest-rate risk

Georgescu¹

2022

Soft Comput

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In this paper, optimal saving models with two risk components are studied: the labor income risk and the interest rate risk. These risks can be modeled probabilistically by random variables or possibilistically by fuzzy numbers. In mixed models, one of the components is probabilistic and the other one is possibilistic. After the construction of two mixed models of optimal saving, several notions of precautionary saving are defined. These measure the variation in optimal saving level when moving from one model to another (usually by adding a risk component). The main results of the paper establish necessary and sufficient conditions on the positivity of different precautionary savings. (This means that the presence of new risks generates extra-saving.)

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“…ISSN 2162-4860 2021 Since Leland (1968) incorporated uncertainty into an intertemporal saving model, precautionary saving motive has long been recognized as an alternative to the life-cycle hypothesis (Kimball, 1992;Weil, 1993;Cagetti, 2000;Menegatti, 2007;Nocetti & Smith, 2011;Magnani, 2017;Vergara, 2017). With the presumption that there is a link between income uncertainty and the level of dissaving (Carroll, 1992), the precautionary saving hypothesis captures the effects of future income uncertainty on intertemporal wealth allocation (Baiardi et al, 2019).…”

Section: Business and Economic Researchmentioning

confidence: 99%

Determinants of Household Savings: An Empirical Evidence from the OECD Member Countries

Jeon

Lee

2021

BER

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Using the data from the 36 OECD member countries over a time period of 1970-2017, we study variations in household saving rate across the countries through the lens of the socio-economic and -demographic shifts over time. In addition to traditional determinants of household saving such as life expectancy, education, average number of children born per woman over a lifetime, and household debts, we examined changes in the socio-economic and -demographic conditions that are conducive to the human capital value of female labor force and thus female employment opportunities. We have identified that the narrower is the gap between genders in higher education attainment and employment, the higher is the household saving rate. Our empirical findings also suggest that both giving childbirth at an old age and preferential income tax rates for households with children are negatively affecting the household saving rate.

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A new interpretation of the condition for precautionary saving in the presence of an interest-rate risk

Cited by 12 publications

References 17 publications

The interest rate for saving as a possibilistic risk

The interest rate for saving as a possibilistic risk

Mixed models for optimal saving with labor income risk and interest-rate risk

Determinants of Household Savings: An Empirical Evidence from the OECD Member Countries

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