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August 1979

Inflation and Personal Saving: An Update

by Claudia R. Campbell and Jean M. Lovati

From 1965 to 1974, a decade of rapid inflation, households saved relatively more of their current income than they had in the previous decade of generally stable prices. This paper updates earlier investigations of the relationship between inflation and saving to include the years 1975 through 1978. In particular, it examines the long-run saving response to inflation in order to determine whether the observed impact of inflation on saving is merely a temporary phenomenon.