Does Macroeconomic Policy Affect Private Savings in Europe? Evidence From a Dynamic Panel Data Model

Private savings mirror consumption behavior. In Europe, the dynamic of consumption is very low, and at the same time, savings are increasing. Is this a result of macroeconomic policy? A GMM estimator is used to analyze the determinants of private saving in the EU?s 15 member states. Our main findings are that savings rates inherit a certain degree of persistence and that income growth causes an increase in saving. While monetary policy is totally insignificant, fiscal policy has a major impact on private savings. The long-run effects of public deficits are greater than the effects of rising income.