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Does Financial Depth Improve Aggregate Savings Performance? Further Cross‐Country Evidence

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  • Christopher J. Cook

Abstract

The paper examines whether financial depth can encourage savings. The main issue concerns how best to measure financial depth. A variety of proxies have been used in the past, mostly in the form of financial intermediation ratios (FIRs). A second issue concerns specification. Misspecification in earlier work may have overstated the importance of financial depth. A final issue concerns the effect of outliers, which are dealt with using robust estimation techniques. Based on a broadly specified lifecycle regression model and data from 122 countries, it is concluded that, although financial depth has a positive influence on savings, its strength continues to be open to question. Only one FIR and a non‐FIR proxy (bank offices per person) are unambiguously significant. These results suggest that further work could be fruitful, especially if directed toward improving the accuracy and consistency of existing FIR data.

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  • Christopher J. Cook, 2003. "Does Financial Depth Improve Aggregate Savings Performance? Further Cross‐Country Evidence," Review of Development Economics, Wiley Blackwell, vol. 7(2), pages 248-265, May.
    • Handle: RePEc:bla:rdevec:v:7:y:2003:i:2:p:248-265
    DOI: 10.1111/1467-9361.00189
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