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Saving Behaviour in OECD Countries: Evidence from Panel Cointegration Tests

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  • Sarantis, Nicholas
  • Stewart, Chris

Abstract

We use recently developed panel cointegration and integration tests, which allow for heterogeneity in parameters and dynamics across countries, to examine the long-run determinants of aggregate private saving rates in a dynamic panel of OECD countries during the post Second World War period. These techniques are more powerful than the conventional tests and overcome the inconsistency problem of the fixed-effect estimator typically employed in cross-country studies of saving behaviour. We employ a number of alternative cointegration methods and also construct a private disposable income series, while previous studies on private savings tend to proxy income with GDP. We find strong evidence for the existence of a long-run equilibrium saving function based on an extended version of the life-cycle hypothesis which allows for the influence of liquidity constraints. Our results suggest a number of significant determinants of saving rates, but the parameter estimates vary significantly across countries. Copyright 2001 by Blackwell Publishers Ltd and The Victoria University of Manchester

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  • Sarantis, Nicholas & Stewart, Chris, 2001. "Saving Behaviour in OECD Countries: Evidence from Panel Cointegration Tests," Manchester School, University of Manchester, vol. 69(0), pages 22-41, Supplemen.
  • Handle: RePEc:bla:manchs:v:69:y:2001:i:0:p:22-41
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