Drivers of Household Savings in East Central European Countries : A Push and Pull Model Perspective

Funding text: University of Public Service, Eötvös József Research Centre

Abstract

There is no consensus in the economics theory about the determinants of household saving. The article composes vector error correction (VEC) models to identify the determinants of household saving in the East Central European countries from 2005–2020. Its novelty is that it identifies push and pull factors in accordance with the Keynesian and neoclassical theories whose mixed approach has not been included in the methodology of relevant papers in relation with East Central European countries. The examined countries are indicated to be homogenous from macroeconomic perspective. Results confirm that household saving increases because of decreases in consumer confidence, unemployment, and inflation rates. Increases in the deposit rate and real house price index are related to these pull factors, while decreases in the official share index correlates withincreases in household saving. Results can serve as guidelines for policy makers about incentives which stimulate household saving most effectively in the region.