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SHOULD THE DECLINE IN THE PERSONAL SAVING RATE
BE A CAUSE FOR CONCERN?
With the personal saving rate in the
U.S. declining steadily over the last two decades, many economists
and policymakers have expressed concern about whether U.S.
households are providing adequately for long-term needs.
Alan Garner, an assistant vice
president and economist at the Federal Reserve Bank of Kansas City
explores the issue in “Should the Decline in the Personal Saving
Rate Be a Cause for Concern?” The article is featured in the second
quarter edition of the Bank’s Economic Review.
After examining various measurement
problems and economic arguments, Garner finds that while there may
be some legitimate reasons for concern, the decline in the personal
saving rate may not be as alarming as it first appears.
He writes that the most commonly cited measure of personal saving,
produced by the U.S. Department of Commerce from the national income
and product accounts, might be revised upward in the future.
Additionally, a revised accounting framework that better reflected
growth in the knowledge economy would likely raise estimated
personal saving as well.
Although some part of the U.S. population is probably not saving
adequately for future needs and large adjustments in personal saving
could affect short-term growth, Garner concludes that the overall
decline in personal saving may not be as severe an economic problem
as some have suggested. The article is available on the Bank’s Web site at www.KansasCityFed.org. ### Return to
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