New model predicts long-term saving patterns across countries with precision.
The paper develops a model to study how people in different countries make decisions about saving money. Many existing models fail to predict saving behavior accurately. The new model links people's desired spending to their income, leading to more realistic long-term predictions. The study shows that factors like preferences, interest rates, income growth, government spending, and debt all affect how much people save. By analyzing data from OECD countries, the model can explain why saving rates vary across economies.