Macroprudential Policy, Uncertainty and Household Savings Behaviour

The impact of uncertainty on household savings decisions has long been of interest, however, this has mainly been in the context of households' reaction to labour income shocks. In this paper, we investigate the impact on... [ view full abstract ]

The impact of uncertainty on household savings decisions has long been of interest, however, this has mainly been in the context of households' reaction to labour income shocks. In this paper, we investigate the impact on Irish household savings decisions of macroprudential policy measures introduced by the Central Bank of Ireland in early 2015. These measures, which require larger downpayments than previously was the case, constitute a significant new source of income uncertainty for those seeking to engage in homeownership. Using a unique, nationally representative survey of households' savings decisions we find that the measures have had a significant impact on savings decisions, particularly for those who already felt they are not saving enough.