The role of household savings in economic stability and growth

The economic and economic policy assessment of household savings is characterized by a peculiar duality. On the one hand, household savings play a prominent role in financing investments and maintaining the external financial balance of national economies. At the same time, household consumption has a decisive influence on GDP growth in every country, as it is the largest component of GDP on the expenditure side. And since household savings are the portion of disposable income remaining after consumption expenditure, higher consumption means lower savings. In other words, high household financial savings from a given income result in lower consumption (GDP) but better financial balance, while low savings result in higher consumption but greater external financial vulnerability. Economic policies try to balance these dilemmas – as we will see in our study – with relatively little success. The 2008 international financial crisis caused a severe financial shock and imbalance in the world that continues to this day. The negative effects of the crisis on public debt and the options for dealing with them occupy a large space in the literature and are also at the center of US and European economic policy. Relatively less attention has been paid to the savings behavior of households before the crisis and its financial and real economic consequences after the crisis.