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

By Masao Ogaki, Jonathan David Ostry, Carmen Reinhart

January 1, 1995

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Masao Ogaki, Jonathan David Ostry, and Carmen Reinhart. Saving Behavior in Low and Middle-Income Developing Countries: A Comparison, (USA: International Monetary Fund, 1995) accessed October 1, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Consumption, Domestic savings, Financial services, Income, National accounts, Private savings, Real interest rates

Keywords: Africa, Consumption, Consumption growth, Discount factor, Domestic savings, Food consumption, Income, Private savings, Rate of return, Real interest rates, Real rate of interest, Saving elasticity, Saving rate, Subsistence consumption level, Utility function, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1995/003
Stock No:

WPIEA0031995
ISBN:

9781451841848
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 43, No. 1, March 1996.

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