The impact of borrowing on household saving behavior the case of Turkey 2003 – 2012

Abstract

The aim of this Ph.D. thesis is to contribute to the vast literature on the determinants of household saving and reassess the precautionary saving preferences of Turkish households by introducing liquidity and debt related factors aside from the general saving contributors. The precautionary saving motive against future income uncertainties defined as one of the leading indicators of saving preferences is effected through liquidity effects especially in less financialized economies with uneven income distributions. The sharp decline in Turkish households‘ saving ratio in the global financialization period is a good example of the changing saving dynamics with liquidity and debt concepts. in my thesis i use the Turkish Household Budget Surveys for the period of 2003 to 2012. in addition to the socioeconomic and demographic information in these surveys i also utilize generated liquidity and debt indicators. Descriptive analysis confirms the predictions of the saving literature showing young and impatient households to be less inclined to save. Education level improves while employment focuses on the service sector. Uneven income distribution is one of the major factors to limit saving and also precautionary saving opportunities for a significant portion of observations and elevates the importance of liquidity conditions. Empirical analysis confirms the presence of precautionary saving in Turkish households while its significance is lower after the 2008 crisis once liquidity effects are introduced. Moreover wealthy and entrepreneur households are observed to be natural savers. Presumably liquidity constrained households do not demonstrate a difference in precautionary saving preferences but confirming the predictions of the liquidity constraint households hypothesis they dissave with easier liquidity conditions. The presence of debt is an additional saving motive. it is suggested that an improvement in income distribution and a decline in the liquidity constrained households‘ share would rebalance the low saving level of Turkish households.