Re-examining the decline in the US saving rate: The impact of mortgage equity withdrawal

• Role of mortgage equity withdrawal in explaining decline in US saving rate.
• VEC model with saving rate, asset prices, equity withdrawal and interest rates.
• Mortgage equity withdrawal key determinant of savings.

This paper investigates the effect of mortgage equity withdrawal on saving in the US over the period 1993–2011. A multivariate time series analysis based on a vector error correction model (VECM) is carried out. The saving rate, mortgage equity withdrawal, net wealth, interest rates and inflation are included in the empirical model. The results show that the equity withdrawal mechanism plays a relevant role in explaining the saving rate pattern.