The household saving rate is slowing down since the mid-1980s and in 2018 registered a record low. This article aims to contribute to the debate on the evolution of household savings in Portugal by considering both the microeconomic behaviour and the macroeconomic dynamics of household savings. First, we use microdata from the Household Finance and Consumption Survey (HFCS) to empirically assess the main microeconomic determinants of household savings, the heterogeneity across households regarding different ways of financing negative savings, and the main factors determining liquidity constrained agents. Second, we develop a time-series model for aggregate consumption to forecast the household saving rate in Portugal. We found household characteristics and heterogeneity regarding individual variables to be significant and economically important determinants of household saving decisions and credit constraints. Moreover, our out-of-sample forecast suggests there was no structural change in household savings decisions, indicating that the unexpected rise in the Portuguese household saving rate during the 2008 recession was led by temporary shocks to income and wealth.
