Explaining Differences in the Domestic Savings Ratio Across Countries: A Panel Data Study

Arbeitspapier

This paper seeks to analyse the major determinants of differences in the domestic savings ratio between countries using panel data for 62 countries over the period 1967-1995. A basic distinction is made between the determinants of the capacity to save and the willingness to save. The capacity to save depends primarily on the level of per capita income (but non-linearly) and the growth of income (the life cycle hypothesis), and the empirics strongly support these hypotheses. The willingness to save is assumed to depend on financial variables such as the rate of interest, the level of financial deepening and inflation. We find no support for a positive interest rate effect, but strong support for the level of financial deepening measured by the ratio of quasi-liquid liabilities to GDP. Inflation exerts a mild positive effect on saving but soon turns negative. Total saving also depends on government saving, and a surprisingly strong negative relation is found between the ratio of tax revenue to GDP and the domestic savings ratio.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Department of Economics Discussion Paper ; No. 9904

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth
• Subject: Domestic savings ; income ; financial variables ; tax

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hussein, Khaled A. ; Thirlwall, A.P.
• Event: Veröffentlichung
• (who): University of Kent, Department of Economics
• (where): Canterbury
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/105532
• Last update: 10.03.2025, 11:42 AM CET