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Banking Sector Development and Household Saving in Emerging Eastern Europe

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  • Ramiz Rahmanov

Abstract

This article examines the impact of the banking sector development on households??? saving dynamics in the emerging economies of Eastern Europe. For this purpose, we use the mean group FMOLS estimator to estimate the saving function augmented with variables characterizing three dimensions of the banking sector development ??? depth, efficiency, and stability. The mean group results show that an increase in the depth and stability of the banking sector significantly stimulates saving, whereas an improvement in the efficiency has no significant effect on saving. Additionally, we find that an increase in the real GDP per capita and age dependency ratio significantly and positively affects saving, while an increase in the real interest rate has a significantly negative effect on saving.

Suggested Citation

  • Ramiz Rahmanov, 2015. "Banking Sector Development and Household Saving in Emerging Eastern Europe," William Davidson Institute Working Papers Series wp1089, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2015-1089
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    More about this item

    Keywords

    household saving; banking sector development; Eastern Europe;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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