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Savings Determinants in Colombia: 1925-1994

  • Andrés Escobar
  • Mauricio Cardenas

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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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 3009.

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Date of creation: Sep 1997
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Handle: RePEc:idb:wpaper:3009
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