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Private Saving in India

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  • Norman Loayza
  • Rashmi Shankar

Abstract

This article studies the evolution of the private saving rate in India during 1960-95. Its distinctive feature is that it proposes three new measures of private saving, which are incremental improvements to the (naive) national accounts measure. The improvements consist of accounting for capital losses to private net worth due to inflation, including expenditures on durable goods as a form of saving, and expanding the definition of saving to include human capital expenditures. After examining descriptive trends and reviewing the related literature, the article tests the hypothesis that households that save in India “pierce the corporate veil”. The evidence shows that, in fact, changes in corporate saving are offset by changes in household saving, indicating that the unit of analysis should be aggregate private saving. The core analytical section of the article studies how the behavior of the private saving rate is related to the real interest rate, per capita income, the dependency ratio, financial depth, the government saving rate, and the share of agriculture in gross domestic product. The empirical analysis is done by estimating error-correction models on aggregate annual data, although most of the discussion centers on long-run effects. Copyright The Author 2000. Published by Oxford University Press on behalf of the International Bank for Reconstruction and Development / the world bank . All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.

Suggested Citation

  • Norman Loayza & Rashmi Shankar, 2000. "Private Saving in India," World Bank Economic Review, World Bank Group, vol. 14(3), pages 571-594, September.
  • Handle: RePEc:oup:wbecrv:v:14:y:2000:i:3:p:571-594
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    Cited by:

    1. Herman Bennett & Norman Loayza & Klaus Schmidt-Hebbel, 2001. "Un estudio del ahorro agregado por agentes económicos en Chile," Central Banking, Analysis, and Economic Policies Book Series,in: Felipe Morandé & Rodrigo Vergara & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edit (ed.), Análisis Empírico del Ahorro en Chile, edition 1, volume 1, chapter 3, pages 49-82 Central Bank of Chile.
    2. FERROUHI, El Mehdi & LEHADIRI, Abderrassoul, 2014. "Savings Determinants of Moroccan banks: A cointegration modeling approach," MPRA Paper 76371, University Library of Munich, Germany.
    3. Shahbaz, Muhammad & Nawaz, Kishwer & AROURI, Mohamed El Hedi & Teulon, Frédéric, 2013. "Does The Keynesian Absolute Income Hypothesis Exist in Pakistan?," MPRA Paper 47923, University Library of Munich, Germany, revised 01 Jul 2013.
    4. Chowdhury, Abdur R., 2001. "The Impact of Financial Reform on Private Savings in Bangladesh," WIDER Working Paper Series 078, World Institute for Development Economic Research (UNU-WIDER).
    5. Barry Bosworth & Susan M. Collins & Arvind Virmani, 2006. "Sources of Growth in the Indian Economy," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 3(1), pages 1-69.
    6. Mondher bellalah & Olivier Levyne & Omar Masood, 2013. "Does co-integration and causal relationship exist between the non-stationary variables for Chinese bank’s profitability? Empirical evidence," THEMA Working Papers 2013-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    7. Mehboob Ahmad & Tasneem Asghar, 2004. "Estimation of Saving Behaviour in Pakistan Using Micro Data," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 9(2), pages 73-92, Jul-Dec.
    8. Ismail, Aisha & Rashid, Kashif, 2013. "Determinants of household saving: Cointegrated evidence from Pakistan (1975–2011)," Economic Modelling, Elsevier, vol. 32(C), pages 524-531.
    9. Juan Nicolás Hernández A, 2006. "Revisión de los determinantes macroeconómicos del consumo total de los hogares para el caso colombiano," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 24(52), pages 80-109, December.
    10. repec:ipg:wpaper:2014-411 is not listed on IDEAS
    11. James Ang & Kunal Sen, 2011. "Private saving in India and Malaysia compared: the roles of financial liberalization and expected pension benefits," Empirical Economics, Springer, vol. 41(2), pages 247-267, October.
    12. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2001. "Una Revisión del COmportamiento y de los determinantes del ahorro en el mundo," Central Banking, Analysis, and Economic Policies Book Series,in: Felipe Morandé & Rodrigo Vergara & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edit (ed.), Análisis Empírico del Ahorro en Chile, edition 1, volume 1, chapter 2, pages 13-48 Central Bank of Chile.
    13. Omar Masood & Priya Darshini Pun Thapa & Olivier Levyne & Frederic Teulon & Rabeb Triki, 2014. "Does Co-integration and Causal Relationship Exist between the Non- stationary Variables for Chinese Bank’s Profitability? An Empirical Evidence," Working Papers 2014-249, Department of Research, Ipag Business School.
    14. Ken Chamuva Shawa, 2016. "Drivers Of Private Saving In Sub-Saharan African Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 41(2), pages 77-110, June.
    15. Ferrucci, Gianluigi & Miralles, Cesar, 2007. "Saving behaviour and global imbalances: the role of emerging market economies," Working Paper Series 842, European Central Bank.
    16. Beckmann, Elisabeth & Mare, Davide Salvatore, 2017. "Formal and informal household savings: how does trust in financial institutions influence the choice of saving instruments?," MPRA Paper 81141, University Library of Munich, Germany.
    17. Shahbaz, Muhammad & Nawaz, Kishwar & Arouri, Mohamed & Teulon, Frédéric & Uddin, Gazi Salah, 2013. "On the validity of the Keynesian Absolute Income hypothesis in Pakistan: An ARDL bounds testing approach," Economic Modelling, Elsevier, vol. 35(C), pages 290-296.

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