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What drives private saving around the world?

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Author Info
Loayza, Norman
Schmidt-Hebbel, Klaus
Serven, Luis

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Abstract

The authors investigate the policy and non-policy factors behind saving disparities, using a large panel data set and an encompassing approach including several relevant determinants of private saving. They extend the literature in several dimensions, by: 1) Using the largest data set on aggregate saving assembled to date. 2) Using panel instrumental variable techniques to correct for endogeneity and heterogeneity. 3) Performing robustness checks on changes in estimation procedures, data samples, and model specification. Their main empirical findings: a) Private saving rates show considerable inertia (are highly serially correlated even after controlling for other relevant factors). b) Private sector rates rise with the level and growth rate of real per capita income. So policies that spur development are in indirect but effective way to raise private saving rates. c) Predictions of the life-cycle hypothesis are supported in that dependency ratios generally have a negative effect on private saving rates. d) The precautionary motive for saving is supported by the finding that inflation - conventionally taken as a summary measure of macroeconomic volatility - has a positive impact on private saving, holding other facts constant. e) Fiscal policy is a moderately effective tool for raising national saving. F) the direct effect of financial liberalization are largely detrimental to private saving rates. Greater availability of credit reduces the private saving rate; financial depth and higher real interest rates do not increase saving.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2309.

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Date of creation: 31 Mar 2000
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Handle: RePEc:wbk:wbrwps:2309

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Keywords: Environmental Economics&Policies; Banks&Banking Reform; Economic Theory&Research; Payment Systems&Infrastructure; Contractual Savings; Economic Theory&Research; Achieving Shared Growth; Environmental Economics&Policies; Inequality; Banks&Banking Reform;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  4. White, Halbert, 1982. "Instrumental Variables Regression with Independent Observations," Econometrica, Econometric Society, vol. 50(2), pages 483-99, March. [Downloadable!] (restricted)
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  11. 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. [Downloadable!] (restricted)
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  15. Corbo, Vittorio & Schmidt-Hebbel, Klaus, 1991. "Public policies and saving in developing countries," Journal of Development Economics, Elsevier, vol. 36(1), pages 89-115, July. [Downloadable!] (restricted)
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  16. Nadeem Ul Haque & Sunil Sharma & M. Hashem Pesaran, 1999. "Neglected Heterogeneity and Dynamics in Cross-Country Savings Regressions," IMF Working Papers 99/128, International Monetary Fund.
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  17. Maravall, Agustin & Planas, Christophe, 1999. "Estimation error and the specification of unobserved component models," Journal of Econometrics, Elsevier, vol. 92(2), pages 325-353, October. [Downloadable!] (restricted)
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  19. J. Humberto Lopez & K. Schmidt-Hebbel & Luis Servén, 2000. "How Effective is Fiscal Policy in Raising National Saving?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 226-238, May. [Downloadable!] (restricted)
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  23. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. Chowdhury, Abdur R., 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," BOFIT Discussion Papers 3/2003, Bank of Finland, Institute for Economies in Transition. [Downloadable!]
  3. 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. [Downloadable!]
  4. Aleksander Aristovnik, 2006. "The Determinants & Excessiveness of Current Account Deficits in Eastern Europe & the Former Soviet Union," William Davidson Institute Working Papers Series wp827, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  5. Bebczuk, Ricardo & Schmidt-Hebbel, Klaus, 2006. "Revisiting the Feldstein-Horioka Puzzle: An Institutional Sector View," MPRA Paper 1802, University Library of Munich, Germany. [Downloadable!]
  6. Raghbendra Jha, 2007. "Fiscal Policy in Developing Countries: A Synoptic View," ASARC Working Papers 2007-01, Australian National University, Australia South Asia Research Centre. [Downloadable!]
  7. Sebastian Edwards, 2001. "Does the Current Account Matter?," NBER Working Papers 8275, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Raghbendra Jha, 2001. "The Challenge of Fiscal Reform in India," ASARC Working Papers 2001-11, Australian National University, Australia South Asia Research Centre. [Downloadable!]
  9. 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. [Downloadable!]
    Other versions:
  10. Jaume Ventura, 2002. "Towards a Theory of Current Accounts," NBER Working Papers 9163, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Ferro, Gustavo & Antón Rodríguez, Martín, 2007. "Crédito, producto y eficiencia en la producción de crecimiento
    [Credit, production and efficiency in the production of growth]    ," MPRA Paper 15094, University Library of Munich, Germany, revised Mar 2009. [Downloadable!]
  12. Abdur R. Chowdhury, 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," Macroeconomics 0303006, EconWPA. [Downloadable!]
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