This study analyses the remarkable growth in Italian households' financial savings during the COVID-19 pandemic by identifying three shocks due to containment measures, fear of infection, and macroeconomic uncertainty. The analysis is based on the estimate of an econometric model that takes into account time-varying parameters and stochastic volatility, which are useful for the study of periods characterized by extreme values in the macroeconomic series.
The results show that all the shocks identified contributed to the growth in households' financial savings, but containment measures had the greatest impact, especially in the period immediately following their introduction. The counterfactual analysis suggests that in the absence of the three shocks identified, from March to December 2020, households' financial savings would have amounted to €67 billion instead of the €110 billion recorded.
