Quantitative Easing, Households' Savings and Growth: A Luxembourgish Case Study

Sarah Goldman (1) , Shouyi Zhang (2)

1 Lux-SIR
2 LEFMI - Laboratoire d’Économie, Finance, Management et Innovation - UR UPJV 4286

The aim of the paper is to evaluate the impact of Quantitative Easing (QE) on economic growth through households’ saving, in particular currency, deposits, and mutual funds. We focus on currency, deposits, and mutual funds since they represent more than 75% of the total assets of Luxembourgish households (on average more than 50% for the currency and deposits and about 25% for the mutual funds for the period 2002Q1 to 2016Q2). We try to under-line how savings’ decisions are affected by unconventional monetary policies during crisis periods, economic instability and low-interest rate environment. Different scenarios are taken into account. Three trials, with one being the base-line model, are performed. The baseline is run with the pre-crisis values for all model parameters. The first scenar-io presents a crisis environment without quantitative easing policy whereas the second Scenario introduces the QE policy in a crisis environment. According to our simple theoretical model, the saving rate decreases during an eco-nomic crisis without QE framework. This result may be interpreted as a “ratchet effect”, and increase globally when the QE program is applied. For the wealthier the precautionary saving rises (despite its weak yield) due to economic uncertainty whereas the poorest population dissave.

Mots clés: Quantitative Easing Policy; Mutual Funds; Currency

Domaines: Economies et finances

Sarah Goldman, Shouyi Zhang. Quantitative Easing, Households' Savings and Growth: A Luxembourgish Case Study. The Economic Research Guardian, 2022, 12 (1), pp.45-54. ⟨hal-04080189⟩