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The Saving Collapse during the Transition in Eastern Europe

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  • Cevdet Denizer
  • Holger C. Wolf

Abstract

Almost all of the transition economies in Eastern Europe and the former Soviet Union experienced a severe decline in their national saving rates. The saving collapse could be explained by the elimination of involuntary saving, a feature of central planning, or by a change in equilibrium saving reflecting the new economic-circumstances following the end of socialism. The predicted saving rates of market economies with the same fundamentals as the transition economies before the transition are computed to test for the presence of involuntary saving. The results provide some support for the hypothesis of consumption smoothing. Also considered is whether differences in the extent of liberalization affected saving rates in the cross section of transition economies. This is found to be the case: greater liberalization is association with lower saving with a one-year lag. To the extent that liberalization is associated with future growth, this finding is consistent with smoothing in the face of output evolving along J-curve. Copyright The Author 2000. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

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Bibliographic Info

Article provided by World Bank Group in its journal The World Bank Economic Review.

Volume (Year): 14 (2000)
Issue (Month): 3 (September)
Pages: 445-455

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Handle: RePEc:oup:wbecrv:v:14:y:2000:i:3:p:445-455

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  1. Bennett, John & Boycko, Maxim, 1995. "Savings and Stabilization Policy in a Pre-Post-Socialist Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 907-19, August.
  2. Carlos A. Végh Gramont & Ratna Sahay, 1995. "Inflation and Stabilization in Transition Economies," IMF Working Papers 95/8, International Monetary Fund.
  3. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
  4. Tarr David G., 1994. "The Terms-of-Trade Effects of Moving to World Prices on Countries of the Former Soviet Union," Journal of Comparative Economics, Elsevier, vol. 18(1), pages 1-24, February.
  5. Paul R. Masson & Tamim Bayoumi & Hossein Samiei, 1995. "International Evidenceon the Determinants of Private Saving," IMF Working Papers 95/51, International Monetary Fund.
  6. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
  7. Reinhart, Carmen & Ostry, Jonathan, 1991. "Private Saving and Terms of Trade Shocks," MPRA Paper 13716, University Library of Munich, Germany.
  8. William Easterly & Stanley Fischer, 1994. "The Soviet Economic Decline: Historical and Republican Data," NBER Working Papers 4735, National Bureau of Economic Research, Inc.
  9. Sebastian Edwards, 1995. "Why are Saving Rates so Different Across Countries?: An International Comparative Analysis," NBER Working Papers 5097, National Bureau of Economic Research, Inc.
  10. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
  11. Richard Portes, 1986. "The Theory and Measurement of Macroeconomic Disequilibrium in Centrally Planned Economies," NBER Working Papers 1875, National Bureau of Economic Research, Inc.
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Cited by:
  1. Mechthild Schrooten & Sabine Stephan, 2003. "Private Savings in Eastern European EU-Accession Countries: Evidence from a Dynamic Panel Data Model," Discussion Papers of DIW Berlin 372, DIW Berlin, German Institute for Economic Research.
  2. Radulescu, Magdalena, 2006. "The Impact of the National Bank of Romania's Monetary Policy on the Banking Credits, the Domestic Savings and Investments (As Compared to the Other Central and Eastern European Countries)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 3(2), pages 10-31, June.
  3. Dumitru, Ionut & Mircea, Romulus & Jianu (Dumitru), Ionela, 2011. "Economisirea în România – evoluţii şi factori determinanţi
    [Savings in Romania - developments and fundamentals]
    ," MPRA Paper 29027, University Library of Munich, Germany.
  4. Aleksander Aristovnik, 2005. "Twin Deficits Hypothesis And Horioka-Feldstein Puzzle In Transition Economies," International Finance 0510020, EconWPA.
  5. Mechthild Schrooten & Sabine Stephan, 2003. "Back on Track? Savings Puzzles in EU Accession Countries," Economics Working Papers 023, European Network of Economic Policy Research Institutes.
  6. Mechthild Schrooten & Sabine Stephan, 2001. "Savings in Central Eastern Europe," Discussion Papers of DIW Berlin 250, DIW Berlin, German Institute for Economic Research.
  7. Abdur R. Chowdhury, 2003. "Private Savings In Transition Economies: Are There Terms Of Trade Shocks?," William Davidson Institute Working Papers Series 2003-572, William Davidson Institute at the University of Michigan.
  8. Mechthild Schrooten & Sabine Stephan, 2004. "Does Macroeconomic Policy Affect Private Savings in Europe?: Evidence from a Dynamic Panel Data Model," Discussion Papers of DIW Berlin 431, DIW Berlin, German Institute for Economic Research.

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