Neglected Heterogeneity and Dynamics in Cross-country Savings Regressions
This paper examines the extent to which the conclusions of cross-country studies of private savings are robust to allowing for the possible heterogeneity of savings behaviour across countries and for the inclusion of dynamics. It reviews the econometric implications of neglected slope heterogeneity and dynamics for the fixed effects estimators routinely used in such studies, and illustrates the nature and extent of the biases involved by a re-examination of time series data from 21 OECD countries. The paper shows that neglecting heterogeneity and dynamics in cross-country savings regressions can lead to misleading inferences about the key determinants of savings behaviour. The results indicate that among the many variables considered in the literature only the fiscal variables - the general government surplus as a proportion of GDP and the ratio of government consumption to GDP - seem to be the key determinants of private savings rates in the industrial countries in the post-World War II period
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1995.
"Saving behavior in low- and middle-income developing countries,"
13757, University Library of Munich, Germany.
- Masao Ogaki & Jonathan D. Ostry & Carmen M. Reinhart, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 38-71, March.
- Reinhart, Carmen & Ogaki, Masao & Ostry, Jonathan, 1996. "Saving Behavior in Low- and Middle-Income Developing Countries: A Comparison," MPRA Paper 6978, University Library of Munich, Germany.
- Masao Ogaki & Jonathan David Ostry & Carmen Reinhart, 1995. "Saving Behavior in Low and Middle-Income Developing Countries; A Comparison," IMF Working Papers 95/3, International Monetary Fund.
- Christian Thimann & Anuradha Dayal-Gulati, 1997. "Saving in Southeast Asia and Latin America Compared; Searching for Policy Lessons," IMF Working Papers 97/110, International Monetary Fund.
- Paul R. Masson & Tamim Bayoumi & Hossein Samiei, 1995.
"International Evidenceon the Determinants of Private Saving,"
IMF Working Papers
95/51, International Monetary Fund.
- Masson, Paul R & Bayoumi, Tamim & Samiei, Hossein, 1998. "International Evidence on the Determinants of Private Saving," World Bank Economic Review, World Bank Group, vol. 12(3), pages 483-501, September.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Pesaran, M. Hashem & Smith, Ron, 1995.
"Estimating long-run relationships from dynamic heterogeneous panels,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 79-113, July.
- Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
- Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 1-9, January.
- Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
- Schmidt-Hebbel, Klaus & Webb, Steven B. & Corsetti, Giancarlo, 1991.
"Household saving in developing countries : first cross-country evidence,"
Policy Research Working Paper Series
575, The World Bank.
- Schmidt-Hebbel, Klaus & Webb, Steven B & Corsetti, Giancarlo, 1992. "Household Saving in Developing Countries: First Cross-Country Evidence," World Bank Economic Review, World Bank Group, vol. 6(3), pages 529-47, September.
- Hsiao, Cheng & Hashem Pesaran, M. & Kamil Tahmiscioglu, A., 2002.
"Maximum likelihood estimation of fixed effects dynamic panel data models covering short time periods,"
Journal of Econometrics,
Elsevier, vol. 109(1), pages 107-150, July.
- Hsaio, Cheng & Pesaran, M. Hashem & Tahmiscioglu, A. Kamil, 1998. "Maximum Likelihood Estimation of Fixed Effects Dynamic Panel Data Models Covering Short Time Periods," Cambridge Working Papers in Economics 9826, Faculty of Economics, University of Cambridge.
- Yongcheol Shin & Ron P Smith & Mohammad Hashem Pesaran, 1998. "Pooled Mean Group Estimation of Dynamic Heterogeneous Panels," ESE Discussion Papers 16, Edinburgh School of Economics, University of Edinburgh.
- Christopher D. Carroll & David N. Weil, 1993.
"Saving and growth: a reinterpretation,"
Working Paper Series / Economic Activity Section
140, Board of Governors of the Federal Reserve System (U.S.).
- Carroll, Christopher D. & Weil, David N., 1994. "Saving and growth: a reinterpretation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 133-192, June.
- Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Gilbert, Christopher L, 1986. "Professor Hendry's Econometric Methodology," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 283-307, August.
- 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.
- Tim Callen & Christian Thimann, 1997. "Empirical Determinants of Household Saving; Evidence From OECD Countries," IMF Working Papers 97/181, International Monetary Fund.
- Orazio P. Attanasio & Lucio Picci & Antonello E. Scorcu, 2000. "Saving, Growth, and Investment: A Macroeconomic Analysis Using a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 182-211, May.
- Pesaran, H. & Smith, R. & Im, K.S., 1995. "Dynamic Linear Models for Heterogeneous Panels," Cambridge Working Papers in Economics 9503, Faculty of Economics, University of Cambridge.
- Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November.
- Swamy, P A V B, 1970.
"Efficient Inference in a Random Coefficient Regression Model,"
Econometric Society, vol. 38(2), pages 311-23, March.
- Tom Doan, . "SWAMY: RATS procedure to compute a GLS matrix weighted estimator for a panel data set," Statistical Software Components RTS00206, Boston College Department of Economics.
- Hsiao, C. & Pesaran, M. H. & Tahmiscioglu, A. K., 1998. "Bayes Estimation of Short-run Coefficients in Dynamic Panel Data Models," Cambridge Working Papers in Economics 9804, Faculty of Economics, University of Cambridge.
- Kajal Lahiri, 2005. "Analysis of Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1093-1095.
When requesting a correction, please mention this item's handle: RePEc:cam:camdae:9904. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb)
If references are entirely missing, you can add them using this form.