۱٫ Introduction

۲٫ Literature review

۳٫ Research methodology and data

۴٫ Research results

۵٫ Conclusions

Acknowledgement

References

What is the households’ saving behavior during different stages of economic cycle? What is the reaction of households’ to the external shocks? Which factors motivate households’ to save in foreign currency rather than in national currency? Are households’ saving decisions rational and based on fundamentals economic indicators or, in contrary, irrational and resulted by ‘herding’ behavior? While these research questions are important for various reasons they are investigated in this empirical study. The objective of this study – to identify the economic and psychological factors influencing the households’ saving behavior. The research methods: the systemic, logical and comparative analysis of the scientific literature and panel regression. The results of this empirical study show that the households’ saving behavior is more irrational especially during economic downturn and financial crisis periods. These empirical findings can be explained by low degree of financial literacy, ineffective communication strategy of the central banks and governments during financial turmoil and economic downturn periods, etc.

Introduction

National savings are determined by the behavior of governments, firms and households which may be influenced in different ways by changing socio-economic and demographic factors. The main sector of a national economy that saves is the household sector which savings behavior has been studied most extensively. Households’ saving behavior is determined by a complex of economic, demographic, social, and cultural factors. Economists (Fidrmuc et al., 2013; Crespo Cuaresma et al., 2014 etc.) have only recently begun to study the households’ saving behavior from behavioral economics perspective while most of empirical studies focus on the socio-economic and demographic determinants of individual’s saving behavior. Investigation of psychological and economic factors of households’ saving behavior is important for various reasons. Savings are of interest to economists and psychologists because of savings’ importance to both the economy and the individual. The importance of savings to the economy lies in a multiplicity of purposes of savings and influence on two fundamentals of the economy – growth and distribution. Households can use their savings as insurance or a protection means against unanticipated changes in economic circumstances as well as a means for redistribution of economic resources over the lifecycle. Materials goods in a form of savings can be easily transferred from one generation to the next. Savings are used to finance domestic and foreign investment, thereby contributing to economic growth. The households’ saving behavior is also important for financial institutions and monetary authorities. Schlueter et al. (2015) argue that “banks face a ‘behavioralization’ of their balance sheets since deposit funding increasingly consists of non-maturing deposits with uncertain cash flows exposing them to asset liability risk”.