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Saving determinants in Colombia: 1925-1994

  • Cardenas, Mauricio
  • Escobar, Andres

This paper analyzes the determinants of savings in Colombia using the framework of an intertemporal model. National saving partially responds to temporary changes in output, according to the permanent income hypothesis. Higher government expenditures (in relation to their permanent level) are associated with lower national saving, refuting the existence of Ricardian equivalence. The paper also tests other common hypotheses in regard to saving behavior. In particular, we find that changes in national savings and changes in investment are perfectly correlated, and that savings cause growth (in the Granger sense). The results also indicate that increases in urbanization and age dependency have had a significantly negative effect on private savings in Colombia. Finally, we find that much of the recent reduction in private savings can be accounted for by the increase in current government consumption, as well as by the effects of higher taxation.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 57 (1998)
Issue (Month): 1 (October)
Pages: 5-44

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Handle: RePEc:eee:deveco:v:57:y:1998:i:1:p:5-44
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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