The relationship between real interest rates, saving, and gre is a cen tral issue in development economics. Using iflaCrOecOnOFflic data for c cross-section of countries, we estimate a model in %i’hlc/I 1/ic intertemporal elasticity of subsutution varies with the level of wealth. The estimated pa ranieters are used to calculate, in the context of a simple endogenous g rowt/i model, the responsiveness of saving to real interest rate c/ian ges for countries at differing stages of developmnent. The hypothesis f/mat the saving rate, and its sensitivity to time interest rate, are a risinq function of income finds strong empirical support.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
6978.
Length: Date of creation: Mar 1996 Date of revision: Publication status: Published in IMF Staff Papers 1.43(1996): pp. 38-71 Handle: RePEc:pra:mprapa:6978
Find related papers by JEL classification: E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment F3 - International Economics - - International Finance F1 - International Economics - - Trade
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