The protective role of saving: Bayesian analysis of British panel data

Document Type

Article

Publication Title

Journal of Empirical Finance

Abstract

We explore whether a protective role for savings against future financial hardship exists using household level panel data for a nationally representative sample of UK households. We jointly model the incidence and extent of financial problems, using a dynamic two-part approach allowing different data-generating processes for experiencing financial hardship and the extent of financial hardship experienced. Our results show that: (i) saving on a regular basis mitigates against the likelihood of experiencing, as well as the number of, future financial problems||(ii) state dependence in financial problems exists||(iii) interdependence exists between financial problems and housing costs, with higher housing costs associated with an increased probability of experiencing financial hardship.

Publication Date

1-9-2021

Publisher

Elsevier

Volume

Vol.63

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