Is the saving rate sensitive to the interest rate? Case of selected OECD countries

This paper analyses the relationship between the net household saving rate and the short-term nominal and real interest rate. It utilizes unbalanced panel data from 23 OECD countries during the time range 1995–2020 in static panel linear models. The main difference from prior research is the consideration of money illusion in interest rates and the partition of the analysis on nominal and real values. When examining these relationships, a set of other variables is used, namely the expected rate of inflation, the unemployment rate, a ratio of the general gross government debt to the GDP, the real housing prices index representing household wealth, a ratio of the total tax burden to the GDP, the annual growth rate of the real GDP per capita, the annual growth rate of household disposable income and a dummy variable which quantifies the presence of the COVID 19 pandemic and the anti-epidemic restrictive measures. The empirical analysis does not show any statistically significant relationship between neither the nominal nor the real interest rate and the net household saving rate. On the contrary, the tax burden ratio and the growth rate of the real GDP are found to have clear statistically significant negative effects, while the annual growth rate of household disposable income and the presence of the pandemic have statistically significant positive effects.