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Precautionary Saving and Aggregate Demand
March 19, 2015Macro, Trade, and Finance Seminar Series

Juan Rubio Ramirez (Duke University) will share the results of some of his recent research, jointly with Edouard Challe (Ecole Polytechnique), Julien Matheron (Banque de France) and Xavier Ragot (PSE).

Speaker: Juan Rubio Ramirez (Duke University) conducts research within the fields of dynamic equilibrium macroeconomic models and time series econometrics. Lately he has also been working on international economic issues, the relationship between volatility and macroeconomic fluctuations, and finance issues. More »

Abstract: We formulate and estimate a tractable macroeconomic model with time-varying precautionary savings. We argue that the latter affect aggregate fluctuations via two main channels: a stabilizing aggregate supply effect working through the supply of capital; and a destabilizing aggregate demand effect generated by a feedback loop between unemployment risk and consumption demand. Using the estimated model to measure the contribution of precautionary savings to the propagation of recent recessions, we find strong aggregate demand effects during the Great Recession and the 1990–1991 recession. In contrast, the supply effect at least offset the demand effect during the 2001 recession.

Paper: Precautionary Saving and Aggregate Demand

Last Updated: Mar 12, 2015

The Macro, Trade, and Finance Seminar Series is a weekly series hosted by the World Bank's research department. The series invites leading researchers from the fields of macroeconomics, growth, trade, international integration, and finance to present the results of their most recent research in a seminar format. The full list of seminars can be viewed here.

The research department is the World Bank's principal research unit—within the Development Economics Vice Presidency (DEC). Unlike operational departments, which also undertake research, its mandate includes research that may be cross-country and across sectors, and reach beyond specific regional units or Global Practices.

Our experts are often cited by the media, the academic community, and other parties interested in international development. Our researchers also provide support to the World Bank's regions and Global Practices to help ensure that the Bank's policy advice is firmly grounded in current knowledge.

The department produces the majority of the Bank’s research and enjoys a high international profile. The work of our researchers appear in academic journals, the World Bank Policy Research Working Paper Series, books, blogs, and special publications such as the Policy Research Reports.

Event Details
  • Date: March 19, 2015
  • Location: World Bank Headquarters, MC10-100
  • Time: 12:30 - 2:00 PM
  • CONTACT: Shweta Mesipam
  • smesipam@worldbank.org