The savings collapse during the transition in Eastern Europe
AbstractThe 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 InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 2419.
Date of creation: 31 Aug 2000
Date of revision:
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;
Other versions of this item:
- Cevdet Denizer & Holger C. Wolf, 2000. "The Saving Collapse during the Transition in Eastern Europe," World Bank Economic Review, World Bank Group, vol. 14(3), pages 445-455, September.
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