Date of This Version
September 2011
Abstract
This paper studies the empirical relationship between consumption and saving under two different sources of uncertainty: financial risk and environmental risk. The analysis is carried out using time series data for six advanced economies in the period 1965-2007. The results support the theoretical conclusions that both financial risk alone and the interaction between financial and environmental risks affect consumption. Moreover, we suggest a solution to some shortcomings which concern the empirical analysis performed with one-argument utility functions. Finally, we provide new estimates of indexes of relative risk aversion and relative prudence, and relative preference of environmental quality.
Recommended Citation
Baiardi, Donatella; Manera, Matteo; and Menegatti, Mario, "Consumption and Precautionary Saving: An Empirical Analysis under Both Financial and Environmental Risks" (September 29, 2011). Fondazione Eni Enrico Mattei Working Papers. Paper 613.
https://services.bepress.com/feem/paper613