Analysis of the increased saving rate in the Czech Republic

This bachelor thesis analyzes the increased saving rate in the Czech Republic, which is above its long-term average after the pandemic and energy crisis. The thesis demonstrates that household expectations of fiscal constraints play a crucial role in the increased saving rate. This conclusion is drawn from simulations of financial constraints in the Ramsey-Cass-Koopmans (RCK) model, where all simulations resulted in a reduction in consumption coupled with an increase in savings following expected and unexpected tax hikes. Subsequently, an empirical analysis was conducted on a sample from 2007Q1 to 2023Q4 for the Czech Republic using the GMM method, which confirms this possible explanation for the increased saving rate. Furthermore, the empirical analysis supports the explanation of the increased saving rate through higher interest rates, consistent with the Fisher model. Both the theoretical and empirical analyses thus provide strong evidence for explaining the increased savings rate in recent years.