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Household Savings & The Macroeconomy

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In this paper, we document some key relationships between micro-level household behavior and macro-level aggregates for the Indian economy. Using the CMIE’s Consumer Pyramids Survey, we show that for the period 2014-19, the household-level savings rate around the median of the income distribution correlates strongly with, and has predictive power for, macro-aggregate variables such as the Wholesale Price Index and its rate of change, the Prime Lending Rate, the growth rate of bank credit for personal loans, the growth rate of industry-sector GDP, and the growth rate of bank credit to the household sector. Equally, we also document as a puzzle the absence of any strong relationship between the household-level savings rate and RBI-surveyed indices that are meant to capture citizens’ expectations about the future. We uncover these results at business cycle frequencies, i.e., monthly and quarterly, and we detrend all variables so that what we document are cyclical co-movements (or lack thereof). We conjecture that this mode of analysis can be a fruitful way of relating the micro to the macro for the Indian economy, and can offer avenues for uncovering meaningful empirical relationships that warrant proper theoretical explanations. Our primary goal in this paper is to uncover these relationships, and not to explain them. We also offer some conjectures about the meaning of the relationships, or lack thereof, that we document.

The full paper is available here.


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Ghosh, I., Subramanian, V., Krishna, R., & Nigam, R. (2021). Household Savings & The Macroeconomy. Dvara Research.


Ghosh, Indradeep, Vinay Subramanian, Rohith Krishna, and Rakesh Nigam. 2021. “Household Savings & The Macroeconomy.” Dvara Research.


Ghosh, Indradeep, et al. “Household Savings & The Macroeconomy.” Dvara Research (2021).

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