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The savings collapse during the transition in Eastern Europe

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  • Denizer, Cevdet
  • Wolf, Holger C.

Abstract

The authors assess the presence and extent of involuntary savings by comparing the predicted savings rates of market economies with those of the pre-transition economies. On balance, predicted savings rates fell short of actual savings rates, especially for the former Soviet Union and the Baltics -- providing some support for the notion of excessive pre-transition savings. Comparing the savings behavior of market economies and transition economies, they found substantial similarities, except for a negative link between savings and GDP growth. As the fastest-growing transition economies are at the bottom of the adjustment J-curve, the finding is consistent with consumption smoothing. Finally, they explored whether differences in the extent of economic liberalization affected savings rates in the cross-section of transition economies. They found that liberalization is associated with lower savings, with a one-year lag. To the extent that liberalization is perceived as an indicator of likely future growth, this behavior is consistent with smoothing in the face of a J-curve change in output.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2419.

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Date of creation: 31 Aug 2000
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Handle: RePEc:wbk:wbrwps:2419

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Keywords: Insurance Law; Banks&Banking Reform; Economic Theory&Research; Environmental Economics&Policies; Insurance&Risk Mitigation; Environmental Economics&Policies; Banks&Banking Reform; Economic Theory&Research; Insurance&Risk Mitigation; Rural Poverty Reduction;

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  1. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 1999. "What Drives Private Saving Across the World?," Working Papers Central Bank of Chile, Central Bank of Chile 47, Central Bank of Chile.
  2. Reinhart, Carmen & Ostry, Jonathan, 1991. "Private Saving and Terms of Trade Shocks," MPRA Paper 13716, University Library of Munich, Germany.
  3. 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.
  4. Paul R. Masson & Tamim Bayoumi & Hossein Samiei, 1995. "International Evidenceon the Determinants of Private Saving," IMF Working Papers 95/51, International Monetary Fund.
  5. Bennett, John & Boycko, Maxim, 1995. "Savings and Stabilization Policy in a Pre-Post-Socialist Economy," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 27(3), pages 907-19, August.
  6. Richard Portes, 1986. "The Theory and Measurement of Macroeconomic Disequilibrium in Centrally Planned Economies," NBER Working Papers 1875, National Bureau of Economic Research, Inc.
  7. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, Elsevier, vol. 51(1), pages 5-44, October.
  8. de Melo, Martha & Denizer, Cevdet & Gelb, Alan, 1996. "From plan to market : patterns of transition," Policy Research Working Paper Series 1564, The World Bank.
  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. Easterly, William & Fischer, Stanley & DEC, 1994. "The Soviet economic decline : historical and republican data," Policy Research Working Paper Series 1284, The World Bank.
  11. Carlos A. Végh Gramont & Ratna Sahay, 1995. "Inflation and Stabilization in Transition Economies," IMF Working Papers 95/8, International Monetary Fund.
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Cited by:
  1. 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, Institute for Economic Forecasting, vol. 3(2), pages 10-31, June.
  2. Abdur R Chowdhury, 2004. "Private Savings in Transition Economies: Are there Terms of Trade Shocks?," Comparative Economic Studies, Palgrave Macmillan, vol. 46(4), pages 487-514, December.
  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.
  4. 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.
  5. 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.
  6. Mechthild Schrooten & Sabine Stephan, 2002. "Back on Track?: Savings Puzzles in EU-Accession Countries," Discussion Papers of DIW Berlin 306, DIW Berlin, German Institute for Economic Research.
  7. Aleksander Aristovnik, 2005. "Twin Deficits Hypothesis And Horioka-Feldstein Puzzle In Transition Economies," International Finance, EconWPA 0510020, EconWPA.
  8. Mechthild Schrooten & Sabine Stephan, 2001. "Savings in Central Eastern Europe," Discussion Papers of DIW Berlin 250, DIW Berlin, German Institute for Economic Research.

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