|CIRJE-F-448||"The Degree of Precautionary Saving: A Reexamination"|
|Author Name||Lee, Jeong-Joon and Yasuyuki Sawada|
|Full Paper||PDF file|
|Remarks||Subsequently published in Economics Letters, 96(2), 196-201, 2007.|
Extending Dynan's methodology (1993), we show that a signiPcant frac- tion of the prudence parameter puzzle can be explained by a downward omitted variable bias. Further, the estimated prudence is substantially higher for liquidity-constrained households.