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

  • Reinhart, Carmen
  • Ogaki, Masao
  • Ostry, Jonathan

The relationship between real interest rates, saving, and gre is a cen tral issue in development economics. Using iflaCrOecOnOFflic data for c cross-section of countries, we estimate a model in %i’hlc/I 1/ic intertemporal elasticity of subsutution varies with the level of wealth. The estimated pa ranieters are used to calculate, in the context of a simple endogenous g rowt/i model, the responsiveness of saving to real interest rate c/ian ges for countries at differing stages of developmnent. The hypothesis f/mat the saving rate, and its sensitivity to time interest rate, are a risinq function of income finds strong empirical support.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6978.

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Date of creation: Mar 1996
Date of revision:
Publication status: Published in IMF Staff Papers 1.43(1996): pp. 38-71
Handle: RePEc:pra:mprapa:6978
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  1. Jonathan David Ostry & Carmen Reinhart, 1991. "Private Saving and Terms of Trade Shocks: Evidence From Developing Countries," IMF Working Papers 91/100, International Monetary Fund.
  2. 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.
  3. Easterly, William, 1991. "Economic stagnation, fixed factors, and policy thresholds," Policy Research Working Paper Series 795, The World Bank.
  4. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
  5. Donald W.K. Andrews & Christopher J. Monahan, 1990. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Cowles Foundation Discussion Papers 942, Cowles Foundation for Research in Economics, Yale University.
  6. Atish R. Ghosh & Jonathan D. Ostry, 1994. "Export Instability and the External Balance in Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 214-235, June.
  7. Vaidyanathan, Geetha, 1993. "Consumption, liquidity constraints and economic development," Journal of Macroeconomics, Elsevier, vol. 15(3), pages 591-610.
  8. Ogaki, M & Reinhart, C-M, 1995. "Measuring Intertemporal Substitution : The Role of Durable Goods," RCER Working Papers 404, University of Rochester - Center for Economic Research (RCER).
  9. Atkeson, Andrew & Ogaki, Masao, 1996. "Wealth-varying intertemporal elasticities of substitution: Evidence from panel and aggregate data," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 507-534, December.
  10. Hansen, Bruce E., 1992. "Efficient estimation and testing of cointegrating vectors in the presence of deterministic trends," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 87-121.
  11. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  12. Ogaki, M. & Park, Y.Y., 1989. "A Cointegration Approach To Estimating Preference Parameters," RCER Working Papers 209, University of Rochester - Center for Economic Research (RCER).
  13. Park, J.Y. & Ogaki, M., 1991. "Inference in Cointegrated Models Using VAR Prewhitening to Estimate Shortrun Dynamics," RCER Working Papers 281, University of Rochester - Center for Economic Research (RCER).
  14. Joaquim Vieira Ferreira Levy & Jonathan David Ostry, 1994. "Household Saving in France: Stochastic Income and Financial Deregulation," IMF Working Papers 94/136, International Monetary Fund.
  15. Reinhart, Carmen & Vegh, Carlos, 1994. "Intertemporal consumption substitution and inflation stabilization:An empirical investigation," MPRA Paper 13427, University Library of Munich, Germany.
  16. Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-94, June.
  17. Jonathan D. Ostry, 1988. "The Balance of Trade, Terms of Trade, and Real Exchange Rate: An Intertemporal Optimizing Framework," IMF Staff Papers, Palgrave Macmillan, vol. 35(4), pages 541-573, December.
  18. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  19. Antonio Estache, 1994. "World Development Report: Infrastructure for Development," ULB Institutional Repository 2013/44144, ULB -- Universite Libre de Bruxelles.
  20. Razin, Assaf & Svensson, Lars E. O., 1983. "Trade taxes and the current account," Economics Letters, Elsevier, vol. 13(1), pages 55-57.
  21. Sebastian Edwards, 1987. "Anticipated Protectionist Policies, Real Exchange Rates and the Current Account," UCLA Economics Working Papers 437, UCLA Department of Economics.
  22. Giovannini, Alberto, 1985. "Saving and the real interest rate in LDCs," Journal of Development Economics, Elsevier, vol. 18(2-3), pages 197-217, August.
  23. Haque, Nadeem U & Montiel, Peter, 1989. "Consumption in Developing Countries: Tests for Liquidity Constraintsand Finite Horizons," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 408-15, August.
  24. Tamim Bayoumi, 1992. "Financial Deregulation and Household Saving," Bank of England working papers 5, Bank of England.
  25. Ostry, Jonathan D. & Rose, Andrew K., 1992. "An empirical evaluation of the macroeconomic effects of tarrifs," Journal of International Money and Finance, Elsevier, vol. 11(1), pages 63-79, February.
  26. Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 97-125, February.
  27. Calvo, Guillermo A., 1987. "On the costs of temporary policy," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 245-261, October.
  28. Michael Sarel, 1994. "On the Dynamics of Economic Growth," IMF Working Papers 94/138, International Monetary Fund.
  29. Vicente Galbis, 1993. "High Real Interest Rates Under Financial Liberalization: Is there a Problem?," IMF Working Papers 93/7, International Monetary Fund.
  30. Van Wijnbergen, S., 1983. "Interest rate management in LDC's," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 433-452, September.
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