Impact of Natural Disasters on Savings in Iran

The natural disasters decrease the savings through reducing the government savings rate. However, the resultant disasters effect on total savings depends on the private savings changes. In this paper, the impact of natural disasters on total savings is estimated using the data over the period 1973-2006. An Auto-Regressive Distributed Lags (ARDL) technique is used to estimate the empirical model. The results confirm that natural disasters raise the average propensity to savings in Iran. Moreover, the coefficient of error correction term indicates that 69 percent of the disequilibrium is corrected immediately, i.e. in the next year.