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The effects of interest rates on savings in developing countries

Author

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  • Balassa, Bela

Abstract

This paper provides evidence on the effects of interest rates on savings in developing countries. While the evidence is not conclusive, time-series estimates for individual countries as well as cross-section and time-series estimates for a number of countries point to the positive effects of interest rates on savings. At the same time, a variety of factors may have reduced the statistical significance of the estimates. The author points out that estimates of savings in developing countries are subject to considerable error. Also there are other errors associated with the measurement of interest rates and inflation rates, which are necessary to derive real interest rates. Finally, there is evidence that negative real interest rates bring a shift to gold, real estate, and consumer durables, which latter are included in savings as measured in national income statistics.

Suggested Citation

  • Balassa, Bela, 1989. "The effects of interest rates on savings in developing countries," Policy Research Working Paper Series 56, The World Bank.
    • Handle: RePEc:wbk:wbrwps:56
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    References listed on IDEAS

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    2. Iqbal, Z. & James, M.J. & Pyatt, G., 2000. "Three gap analysis of structural adjustment in Pakistan," Other publications TiSEM 5e27cd96-ac5f-45b1-898d-f, Tilburg University, School of Economics and Management.
    3. Iqbal, Zafar & James, Jeffrey & Pyatt, Graham, 2000. "Three-Gap Analysis of Structural Adjustment in Pakistan," Journal of Policy Modeling, Elsevier, vol. 22(1), pages 117-138, January.
    4. Zafar Iqbal, 1993. "Institutional Variations in Saving Behaviour in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 32(4), pages 1293-1311.
    5. Gelb, Alan H., 1989. "Financial policies, growth, and efficiency," Policy Research Working Paper Series 202, The World Bank.
    6. Shirin Akter, 2018. "Do remittances and foreign aid augment the gross savings: Bangladesh, India and Philippines perspective?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(4), pages 449-463, December.
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    8. Juthathip Jongwanich, 2010. "The determinants of household and private savings in Thailand," Applied Economics, Taylor & Francis Journals, vol. 42(8), pages 965-976.
    9. Eun Jin Ryu & Aya Suzuki, 2021. "ROSCAS as Insurance: Comparing Formal and Informal Methods of Saving among the Unskilled Workers in the Ethiopian Cut‐Flower Industry," The Developing Economies, Institute of Developing Economies, vol. 59(3), pages 243-274, September.

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