PUBLICATIONS & REPORTS
PUBLICATIONS & REPORTS
From Kitakyushu to the world: AGI, a research institute that studies Asia's economy and society
Do Non-Prudent Consumers Ever Engage in Precautionary Saving?
Two Observations on Risk and Precautionary Saving
| Author | Luigi VENTURA, Charles Yuji HORIOKA |
|---|---|
| Date of Publication | 2025. 11 |
| No. | 2025-19 |
| Download | 443KB |
Contents Introduction
In this paper, we first show that a particular form of precautionary saving, which we will call “intertemporal precautionary saving” to distinguish it from purely intertemporal and purely precautionary saving, will inevitably arise in the case of pure (downside) risk as long as consumers are risk-averse, even if they are not prudent. We then present a simple example that shows that even pure precautionary saving (i.e., saving generated by risk alone without effects on expected income) may arise as long as consumers are risk-averse, even if they are not prudent and even if risk is speculative (two-sided).