Saving, Growth, and Liquidity Constraints
In the context of an overlapping-generations model, the authors show that liquidity constraints on households (1) raise the saving rate, (2) strengthen the effect of growth on saving, (3) increase the growth rate if productivity growth is endogenous, and (4) may increase welfare. The first three positions are supported by cross-country regressions of saving and growth rates on indicators of liquidity constraints on households. The results suggest that financial deregulation in the 1980s has contributed to the decline in national saving and growth rates in the OECD countries. Copyright 1994, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 109 (1994)
Issue (Month): 1 (February)
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