Macroeconomic Uncertainty and Household Saving in India and China
DOI:
https://doi.org/10.54536/ajebi.v5i2.7680Keywords:
Bayesian Var, Developing Asia, G5, Household Savings, Jel Classification: E2, Macroeconomic UncertaintyAbstract
In this paper, the authors examined the role of macroeconomic uncertainty in driving the behaviour of household savings in two key economies in developing Asia: India and China. We focused on three main sources of economic uncertainty: income uncertainty, fiscal uncertainty and financial market uncertainty. We used the agricultural share of GDP as a measure of income uncertainty; we computed the volatility of global spot gold prices as an indicator for the presence of economic uncertainty, as gold is considered a safe-haven asset. We used Government Surplus/Deficit over GDP to address policy uncertainty. Using yearly data from 1992 to 2023, we independently estimated a Bayesian VAR model for each country and compared impulse responses on household savings by nation. According to the criteria employed in this study, the presence of a Ricardian channel is suggested by the findings that household savings respond to primary balance shocks in both countries. The results highlight that how domestic savers could be impacted by the primary balances of governments of the countries under study.
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