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New Study by Turner College Economist Examines Relationship between Household Saving and GDP

A new study by Turner College economist Frank Mixon analyses the relationship between household savings rates and GDP within the Visegrád Group from 1996 through 2021, a period that includes both the global financial crisis of 2008 and the COVID-19 pandemic of 2020. More specifically, the new study examines the speed of savings rate adjustments to the prior year’s deviation from equilibrium, whether household savings rates support GDP in the short run, and whether GDP plays an important role in determining the household savings rate across the four countries of the Visegrád Group, namely the Czech Republic, Hungary, Poland and Slovakia.  Mixon and his co-authors Nikola Šubová and Ján Buleca of the Technical University of Košice, and Ermanno Affuso of the University of South Alabama, present impulse response functions in the study indicating that a shock to household savings rates leads to fluctuations in real GDP, with the Czech Republic exhibiting the greatest fluctuations, particularly towards the end of the analyzed period, possibly indicating a higher sensitivity of real GDP to changes in household savings rates in that country. Conversely, Poland and Slovakia show the lowest fluctuations, suggesting a more stable or less pronounced short-run relationship between real GDP and household savings rates. Such stability could be associated with other factors driving real GDP, such as government spending, exports, or industrial production, which may mitigate the direct impact of changes in household savings rates on real GDP. Lastly, the study, which is set to appear in a future issue of Post-Communist Economies, also provides results from additional tests suggesting that a long-run relationship between real GDP and household savings rates exists only in countries with higher household savings rates, like those in the Czech Republic and Hungary.


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