The Long-Run Relation between the Personal Savings Rate and Consumer Sentiment

This study examined the long run relationship between the personal savings rate and the index of consumer sentiment in the United States over the 1959-1997 period using cointegration analysis. We find that consumer sentiment and the personal savings rate share a long run equilibrium. The results suggest that households reduce their savings rate when consumer sentiment is high, but the two variables do not drift arbitrarily far apart. The results have implications for long term savings plans and are particularly important for financial counselors and planners