Determinants of the household savings behavior: An application to Turkey

In this thesis we analyze the saving and consumption behavior model of Turkish households, using the TURKSTAT Household Budget Survey microdata between the years of 2002-2013. The Household Budget Surveys are designed as the repeated cross sectional surveys that provide information about social, economic and demographic characteristics of households. The aim of this Ph.D. thesis is to contribute to the understanding of household income dynamics, consumption and saving behaviours in Turkish households and to investigate the validity of Life Cycle Hypothesis and Precautionary Saving Hypothesis in the Turkish economy. In this study cross-sectional analyses and cohort techniques are used as the econometric methods first and log linearized Euler equations are estimated by two step system-GMM tecniques as well. In doing so, firstly we estimated the age-wealth, age-consumption and age-saving profile under identification assumptions about age, cohort and time effect. According to the estimation results, the predictions of the Life-Cycle Hypothesis do not hold for Turkey due to the excess sensitivity of consumption to income. Finally when we tested validity of the Precautionary Saving Hypothesis by estimating log linearized Euler equations for Turkey, the results show that households will postpone their current consumption and increase their saving level in order to keep their lifetime consumption constant when future (labour income) uncertainty occurs. Hence the empirical analysis results confirm that the validity of the Precautionary Saving Hypothesis for Turkey.