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Optimal Saving, Interest Rates, and Endogenous Growth

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  • Gylfason, Thorvaldur

Abstract

The apparent failure of economists thus far to establish a positive empirical link between interest rates and saving does not, by itself, discredit the hypothesis of a direct structural relationship between the two, ceteris paribus. This structural relationship may be shifting about in response to changes in exogenous variables, such as tastes and technology, in a way that is consistent with any type of reduced-form correlation between interest rates and saving in the data. This point is demonstrated within a simple model of optimal saving, interest rates, and economic growth. The different implications of endogenous versus exogenous growth are explored in this context. Copyright 1993 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Gylfason, Thorvaldur, 1993. " Optimal Saving, Interest Rates, and Endogenous Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 517-533, December.
  • Handle: RePEc:bla:scandj:v:95:y:1993:i:4:p:517-33
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    Cited by:

    1. Whitehouse, Edward, 1999. "The tax treatment of funded pensions," MPRA Paper 14173, University Library of Munich, Germany.
    2. Thomas Eichner & Marco Runkel, 2012. "Interjurisdictional Spillovers, Decentralized Policymaking, and the Elasticity of Capital Supply," American Economic Review, American Economic Association, vol. 102(5), pages 2349-2357, August.
    3. Hatzinikolaou, Dimitris, 1997. "Government spending, taxation of interest, and private saving: An empirical analysis using Greek aggregate data," Journal of Development Economics, Elsevier, vol. 52(2), pages 317-330, April.
    4. Mark H. Robson, 1995. "Taxation and household saving: reflections on the OECD report," Fiscal Studies, Institute for Fiscal Studies, vol. 16(1), pages 38-57, February.
    5. 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.
    6. Yi Wen, 2009. "Saving and growth under borrowing constraints explaining the "high saving rate" puzzle," Working Papers 2009-045, Federal Reserve Bank of St. Louis.
    7. Matthias Wrede, 1995. "Tax evasion and growth," Finnish Economic Papers, Finnish Economic Association, vol. 8(2), pages 82-90, Autumn.
    8. Ignacio Hernando & Irene Pablos & Daniel Santabárbara & Javier Vallés, 2018. "Private saving. New cross-country evidencebased on bayesian techniques," Working Papers 1802, Banco de España;Working Papers Homepage.
    9. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
    10. Naeem AKRAM & Muhammad Irfan AKRAM, 2015. "Savings Behaviour In Muslim And Non-Muslim Countries In Context To The Interest Rate," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 25(2), pages 161-177.

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