Precautionary savings not limited to prudent consumers: IMF paper

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Evidence that only prudent consumers can generate positive levels of precautionary savings is false, according to an International Monetary Fund paper published on Thursday.

Agustin Roitman, the paper's author, says a common assumption in standard economic models is that agents are risk-averse and prudent, and it is often argued that prudence is necessary to generate precautionary savings.

Roitman shows that prudence is not necessary to generate precautionary savings in small open-economy models

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