Volume 7, Issue 3, 21-27.

Effect of Uncertainty on Household Savings: Evidence from Developing Countries

Burcak Muge VURAL

Department of Economics, Dokuz Eylul University, Faculty of Business, İzmir, Turkey. E-mail: muge.tunaer@deu.edu.tr.


A considerable literature on consumer preferences over consumption, and savings under uncertainty conditions is based on micro analysis. Recently, there are attempts to carry empirical investigations on a macro level. Yet the literature lacks empirical evidence on developing countries, which are often exposed to uncertainty conditions. This paper aims to fill this gap by exploring the effect of uncertainty on savings and aggregate consumption for a large panel of developing countries. Results are expected to point out important policy implications. Empirical findings reveal the importance of precautionary savings in developing countries. Increased macroeconomic uncertainty induces increased savings. Increased variance of income growth also increases current savings, and variance in consumption expenditures.

JEL Classification: E21.

Key Words: Precautionary Savings; Consumption; Uncertainty.


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