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Business Cycle Fluctuations and Private Savings in OECD Countries: A Panel Data Analysis

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  • Yvonne Adema

    (Erasmus University Rotterdam)

  • Lorenzo Pozzi

    (Erasmus University Rotterdam)

Abstract

We investigate the cyclicality of the private savings to GDP ratio for a panel of 19 OECD countries over the period 1971-2009. We find robust evidence that the private savings ratio is countercyclical. Three theories unambiguously predict a higher private savings ratio during recessions: a Ricardian offset effect, the presence of credit constraints, and precautionary savings. We find evidence only for the latter theory. Our estimations take into account a large number of econometric complications: persistence in the savings ratio, endogeneity of the regressors, cross-country parameter heterogeneity, cross-sectional dependence, stationarity issues, omitted variables, and instrument strength.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 12-144/VI.

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Date of creation: 17 Dec 2012
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Handle: RePEc:dgr:uvatin:20120144

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Web page: http://www.tinbergen.nl

Related research

Keywords: Private Savings; Business Cycles; Ricardian offset; Credit Constraints; Precautionary Savings; Dynamic Panel; Cross-Sectional Dependence;

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References

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Cited by:
  1. Delwar Hossain, 2014. "Differential Impacts of Foreign Capital and Remittance Inflows on Domestic Savings in the Developing Countries: A Dynamic Heterogeneous Panel Analysis," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 2014-07, The Australian National University, Arndt-Corden Department of Economics.

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