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Saving Behavior in Low and Middle-Income Developing Countries; A Comparison


  • Masao Ogaki
  • Jonathan David Ostry
  • Carmen Reinhart


The impact of changes in real interest rates on saving and growth is a central issue in development economics. According to one familiar view, a financial liberalization program which increases real interest rates should encourage saving, thereby boosting investment and growth. While such liberalizations have indeed typically succeeded in raising real interest rates, their impact on private saving has been mixed. This paper uses macroeconomic data for a sample of countries with diverse income levels to estimate a model in which the intertemporal elasticity of substitution varies with the level of wealth. The estimated parameters are then used to calculate, in the context of a simple endogenous growth model, the responsiveness of saving to real interest rate changes for countries at differing stages of development.

Suggested Citation

  • 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.
  • Handle: RePEc:imf:imfwpa:95/3

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    References listed on IDEAS

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    More about this item


    Consumption; real interest rates; cointegration; equation; real rate of interest; real interest rate;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F3 - International Economics - - International Finance
    • F1 - International Economics - - Trade


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