Discussion Paper

What Is behind the Global Jump in Personal Saving during the Pandemic?

Abstract: Household saving has soared in the United States and other high-income countries during the COVID-19 pandemic, despite widespread declines in wages and other private income streams. This post highlights the role of fiscal policy in driving the saving boom, through stepped-up social benefits and other income support measures. Indeed, in the United States, Japan, and Canada, government assistance has pushed household income above its pre-pandemic trajectory. We argue that the larger scale of government assistance in these countries helps explain why saving in these countries has risen more strongly than in the euro area. Going forward, how freely households spend out of their newly accumulated savings will be a key factor determining the strength of economic recoveries.

Keywords: income; saving; fiscal policy; pandemic; COVID-19; consumption; U.S.; Euro area; Japan; Canada; transfers; wages; benefits;

JEL Classification: D14; F0;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2021-04-14

Number: 20210414