US ‘excess savings’ are not excessive




Calculating ‘excess savings’ is simple: they are the cumulative amount by which personal saving during the pandemic exceeded a counterfactual path without COVID-19. As shown in blue in Figure 1, personal saving has been elevated since last March. The red line represents one plausible counterfactual scenario, in which the saving rate out of disposable income is constant at its pre-pandemic level (7.3%), while disposable personal income grows at its average rate over the previous twenty years (3.5%). ‘Excess savings’ are the area between the two lines. According to this calculation, they amount to $1.6 trillion. Different plausible assumptions on the counterfactual evolution of personal saving in the absence of the pandemic lead to relatively small differences in this headline number. 

Author(s): Florin Bilbiie, Gauti Eggertsson, Giorgio Primiceri

Publication Date: 1 March 2021

Publication Site: VoxEU