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M.Comm. / Household savings is an important instrument for any economy and is also a crucial determinant of welfare in developing countries. This study investigates the determinants of household savings in South Africa and the factors that influences the current declines experienced in household savings. Household variables such as household income, expenditure, debt, as well as interest rates were analysed using trends to reveal their specific effect to the overall household savings. The Permanent Income Hypothesis emphasises the notion that people save because they expect a decline in their future income, meaning that savings should be a good predictor of a decline in income. Cointegration analysis on South African Reserve Bank data from 1990Q1 to 2009Q3 was conducted and results revealed that with all variables included, household income is the main determinant of household savings in South Africa. Impulse response functions, variance decomposition functions, as well as the granger-causality test were performed and results showed that household income remains the main determinant of household savings.

This study investigates Life Cycle Hypothesis savings behaviour among South African households. The mobility matrix methodology as well as a multivariate regression analysis was employed to assess the implications of a permanent increase and a temporary decrease in household incomes based on the impacts of the global financial crisis. Using the General Household Survey data from 2002 - 2010, the study concludes that life cycle savings were greater during the period of 2002 - 2004 (,pre-financial crisis') compared with the period of 2008 - 2010 (,post-financial crisis'). Overall, the global financial crisis significantly negatively impacted household retirement savings.

In this thesis I contribute to the applied study of households' consumption and saving behaviour. In the first chapter I introduce and explain why it is relevant to understand how households react to income shocks in terms of their consumption and saving decisions. The second chapter is inspired by a recent paper by Krueger and Perri (2011), who argue that the observed response of household wealth to income shocks, which is smaller over long periods, provides evidence in favour of the classic permanent-income model with perfect financial markets. Whether a model with financial market imperfections, however, such as the standard incomplete-markets model with liquidity constraints, can also generate such a wealth response crucially depends on the importance of precautionary wealth accumulation. I structurally estimate a model with a precautionary- savings motive and show that it can generate the observed wealth responses in the data. I further show that the wealth responses to income shocks do not allow us to rule out financial market imperfections. In the third chapter I extend the analysis, studying empirically what can be learned from international evidence on the way in which households react to income. I use detailed panel data from newly available surveys of Chile, Spain and the United States. Although it compares three different countries with dissimilar levels of development in their financial markets, the evidence suggests that the amount of precautionary savings in these economies is low and that household behaviour is not strongly influenced by the presence of borrowing constraints. The structural estimation for all countries suggests a low target level of wealth resulting from high levels of impatience or low levels of risk aversion. In the fourth chapter I extend the analysis to the real estate properties owned by the households. I revisit the Italian data, building on Kaplan and Violante (2014) who have argued that a substantial fraction of wealthy households with illiquid wealth, such as real estate, behave as hand-to-mouth consumers. In exploring the data, I find that, in the Italian sample, households which adjust their illiquid wealth show responses to income shocks like permanent-income consumers. Instead households which do not adjust their illiquid wealth, and whose behaviour in general can thus not be characterised by the first order conditions, show responses to income shocks which suggest a stronger precautionary-saving motive, such as wealthy hand-to-mouth consumers might be expected to show. The fifth chapter provides the conclusions of the thesis.

It is a conventional wisdom that since the start of the Chinese economic reform in 1978, the domestic saving structure in China has changed significantly. Previous studies of household saving in China (for example: Qian, 1988, Feltenstein et al, 1990, and Wakabayashi and Mackellar, 1999) have usually relied upon the Keynesian absolute-income hypothesis, Duesenberry’s relative-income hypothesis, and Friedman’s permanent-income hypothesis. This thesis uses the Modigliani-Brumberg life-cycle hypothesis to examine the determinants of household saving behavior in the Peoples’ Republic of China during the period 1978 to 2003. The research uses modern cointegration techniques to examine the impact on saving rates of economic growth, age dependency, wealth, the real interest rate, social security payments and unemployment (as a proxy for income uncertainty). Autoregressive distributed lag models are constructed and tested. The results find that economic growth, the real interest rate and social security payments have the expected effect with significant parameters; age dependency has the expected sign but in one model is not statistically significant; and that unemployment is not significant. The most surprising result is that increases in household wealth are associated with increased saving rates, which may help explain very high economic growth rates in China post 1978.

<p> My doctoral dissertation is composed of an introductory chapter followed by five independent chapters on household savings and finances.</p> <p> After the introductory chapter, the second chapter investigates the living standards of Canadian retirees and the adequacy of their financial preparations. We explore the responses of Canadian retirees to subjective survey questions administrated in General Social Surveys and in the 1975 Retirement Survey. Our results show that a significant portion of Canadians report enjoying life more after retirement compared to before retirement. Moreover, in 2002, three quarters of retired Canadians indicated being at least as satisfied with their finances as they were in the year prior to retirement. The most significant correlate of financial dissatisfaction that our analysis uncovers is involuntary retirement and, in particular, involuntary retirement associated with poor health.</p> <p> The third chapter revisits a long standing question of whether households with higher lifetime income save a larger fraction of their income. The major difficulty in empirically assessing the relationship between lifetime incomes and saving rates is finding a credible proxy for lifetime income. Taking advantage of the unique characteristics of the Canadian Family Expenditure Survey data, we construct reliable lifetime income proxies. Our empirical analysis suggests that the estimated relationship between saving rates and lifetime incomes is sensitive to the instrument used to proxy lifetime income. Nevertheless, our preferred estimates indicate that, except for the poorest households (who simply do not save), saving rates do not differ substantially across lifetime income groups. </p> <p> The fourth chapter examines the effect of taxation on households' portfolio allocation decisions. The key challenge in empirically assessing this relation is to find a substantial and plausibly exogenous source of variation in marginal tax rates. We use variation in marginal tax rates across households with the same total earnings, which arise in progressive income tax systems with individual taxation. Employing the Canadian Survey of Household Finances, we find statistically significant but economically modest responses to differential taxation.</p> <p> The fifth chapter investigates the problems associated with the estimation of intertemporal allocation parameters via linearized Euler Equations. We solve and simulate life-cycle consumption models in different economic environments and perform Monte Carlo experiments with these simulated data. Our results suggest that problems associated with the estimation of linearized Euler equations are strongly related to the assumed economic environments. In particular, the validity and relevance of conventional instruments used in the estimation depend on the concavity of the underlying policy rules, which in turn follows from features of the economic environment.</p> <p> The final chapter reviews the economic literature on the saving behavior of lower income households. Our discussion focuses on the motives shaping the saving behavior of low-income households. In addition to the standard economic framework used for analysis of this kind, the Life-Cycle/Permanent Income Hypothesis, we also discuss insights from "behavioral" economics. We review the international evidence on a variety of policies designed to stimulate savings among low income households.</p> / Thesis / Doctor of Philosophy (PhD)

Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. / Savings are vital in the functioning of any economy as the level of savings in an economy determines the resources available for investment. If firms plan to invest more than households save in an open economy, resources will have to be borrowed from overseas. Savings flow into the financial system and help provide funds for investment spending by firms. This study draws a comparison between the determinants of household discretionary savings in South Africa and China. This study as well investigates the effect of household savings on the stock market in South Africa and China. Empirical analysis was performed inorder to determine the relationship between household savings and various variables, and the effect of household savings on the stock market. Money and quasi money (M2) is the only significant variable and having a negative relationship with household savings in South Africa yet in China, inertia is present the lagged household saving rate is significant. In-order to figure out the impact of household savings on the stock market, we regressed household savings against stock market capitalization. The regression results revealed significance of the explanatory variable household saving in South Africa and insignificance in China. Household savings have an effect on the level of stock market capitalization in South Africa but not in China.

Saving is critical for the economic development of a country and can insulate it from unwanted inflation and financial instability as a result of international exposure. South Africa is currently experiencing low savings rates and many South Africans have difficulty servicing their debts. Black Africans form the majority in South Africa and they are therefore of critical importance with regard to saving and this country’s ability to finance future projects. It can be argued that the White South African population is becoming older and will therefore begin to withdraw its savings. A literature review has been undertaken to distil the determinants of saving in general and to observe the applicability of these determinants to Black middle class South Africans. Therefore, this paper seeks to identify the determinants of household savings of the Black middle class, with reference to questionnaires and quantitative answers from the respondents in four of South Africa’s provinces. The key findings of the research indicate that the South African Black middle class is financially illiterate and not disciplined with regard to budgeting. They show a high dependency ratio, and the need for instant gratification. In addition, people are hindered by cultural norms that inhibit them from discussing theirSaving is critical for the economic development of a country and can insulate it from unwanted inflation and financial instability as a result of international exposure. South Africa is currently experiencing low savings rates and many South Africans have difficulty servicing their debts. Black Africans form the majority in South Africa and they are therefore of critical importance with regard to saving and this country’s ability to finance future projects. It can be argued that the White South African population is becoming older and will therefore begin to withdraw its savings. A literature review has been undertaken to distil the determinants of saving in general and to observe the applicability of these determinants to Black middle class South Africans. Therefore, this paper seeks to identify the determinants of household savings of the Black middle class, with reference to questionnaires and quantitative answers from the respondents in four of South Africa’s provinces. The key findings of the research indicate that the South African Black middle class is financially illiterate and not disciplined with regard to budgeting. They show a high dependency ratio, and the need for instant gratification. In addition, people are hindered by cultural norms that inhibit them from discussing their finances. These findings can be traced back to this class’s previous exclusion from the main economy. The recommended outcome of this paper indicates that the South African government should implement budgeting as part of the curriculum in primary and high schools. People leaving employment before retirement should not be allowed to cash out more than 50% of their pension fund, and the private sector should be involved in educating its employees with regard to budgeting and the benefits of saving, while creating an environment that facilitates access to financial providers. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

Philosophiae Doctor - PhD / Savings is essential for boosting economic growth. Low savings in a country will have negative consequences for both investment and economic growth. South Africa has continued to expe rience declining saving rates and in recent years, accompanied by declining economic growth. The study evaluated savings in South Africa by decomposing it into household saving, cor porate saving and public saving. The focus was to investigate the determinants of household savings, corporate and public savings. In addition to examining the determinants of savings, the research has also analysed the saving-investment relationship for South Africa. The study used a Bayesian vector auto regressive model to investigate the determinants of household sav ing from 1980Q1 to 2017Q4. The results of the investigation on household saving showed that GDP, inflation rate, and financial deepening determine household saving in South Africa. The Bayesian VAR was also used to identify the determinant of budget deficit between 1980Q1 to 2017Q and found Real GDP, inflation rate, total government debt, investment by general government and the inflation rate to be determinants. The Blundel-Bond Generalized Method of Moment (GMM) was used to investigate the determinants of corporate saving in form of cash holding for 80 non-financial firms listed on the JSE between 2007 and 2017. The results showed leverage, cash flow, debt maturity and previous amounts of cash holding to have significant effect on cash holding in SA. Lastly, the study examined the saving-investment nexus for South Africa using yearly data from 1980 to 2016. Using the Autoregressive Distributed lag (ARDL) and the Error Correction Model, (ECM), the study found a cointegrating relationship between domestic saving and domestic investment. It further found a positive relationship between domestic saving and domestic investment in both the short and long run. Causality analysis showed a unidirectional causality from domestic saving to domestic investment.

The purpose of this paper is to look into the determinants of household savings in an international cross-section. The focus is on the effects from social security, old-age dependency, participation rate and change in unemployment, among other variables as an addition to the disequilibrium saving hypotheses, which is the base theory for the savings function. The fixed-effect least square dummy variable method is used on panel data of 14 OECD countries over the time-span 2000 to 2018. The determinants that has a significant effect on household saving in the empirical result is unanticipated income; a positive sign supports the permanent-income hypothesis and the disequilibrium saving hypothesis. This means that individuals tend to save the transitory income. The next significant variable is the lagged savings rate, which indicates inactivity in the savings behavior. The change in the unemployment rate is also significant and the positive sign supports the uncertainty hypothesis, indicating that individuals tend to save for precautionary reasons. The last significant variable was social security and it had a negative effect on household savings; which is supported by the life-cycle hypothesis, and can indicate a wealth substitution effect or general confidence in the social security system.