This article examines the determinants of private saving rates in five South Asian nations using annual time series data. An econometric model is developed in which private saving is a function of government expenditures, the money supply, the real interest rate, macroeconomic instability, per capita income growth and two demographic variables. Prior to carrying out the estimations, we test for the stationarity of the data series by carrying out unit root tests. The overall results indicate that government expenditures and past savings have a negative impact on private saving, while the level of financial development and per capita income growth have a positive effect. The degree of urbanization, the real interest rate and the dependency ratio have no noticeable impact on private saving.
Bencivenga, Valeree and Bruce Smith (1991), ‘ Financial Intermediation and Endogenous Growth ’, Review of Economic Studies, 58 (2): 195–209 .
2.
Bertola, Giuseppe (1993), ‘ Factor Shares and Savings in Endogenous Growth ’, American Economic Review, 83 (5): 1184–198 .
3.
Caporale, Gugleelmo , Peter Howells and Alaa Soliman (2005), ‘ Endogenous Growth Models and Stock Market Development: Evidence from Four Countries ’, Review of Development Economics, 9 (2): 166–76 .
4.
Carrol, Christopher and David Weil (1993), ‘Savings and Growth: A Reinterprelation’, NBER Working Paper Series, WP#4407 (September), National Bureau of Economic Research, Cambridge, MA .
5.
Carrol, Christopher , J. Overland and D. Weil (2000), ‘ Saving and Growth with Habit Formation ’, American Economic Review, 90 (3): 341–55 .
6.
Dayal-Ghulati, A. and C. Thimann (1997), ‘Saving in Southeast Asia and Latin America Compared: Searching for Policy Lessons’, IMF Working Paper WP/97/110, International Monetary Fund, Washington D.C.
7.
Domar, Evsey (1946), ‘ Capital Expansion, Rate of Growth and Employment ’, Econometrica, 14 (2): 137–47 .
8.
Domar, Evsey (1947), ‘ Expansion and Employment ’, American Economic Review, 37: 34–55 .
9.
Edwards, Sebastian (1996), ‘ Why are Latin America's Savings Rates So Low? An International Comparative Analysis ’, Journal of Development Economics, 51 (1): 5–44 .
10.
Enders, W. (1995), Applied Econometric Time Series. New York: John Wiley & Sons .
11.
Engle, Robert and Clive Granger (1987), ‘ Cointegration and Error-Correction: Representation, Estimation, and Testing ’, Econometrica, 55 (2): 251–76 .
12.
Harrod, Roy, F. (1939), ‘ An Essay in Dynamic Theory ’, Economic Journal, 49 (2): 14–33 .
13.
Johansen, S. (1988), ‘ Statistical Analysis of Cointegration Vector ’, Journal of Economic Dynamics and Control, 12(2–3): 231–54 .
14.
Johansen, S. and K. Juselius . (1990), ‘ Maximum Likelihood Estimation and Inference on Co-integration with Application to the Demand for Money ’, Oxford Bulletin of Economics and Statistics, 52: 169–210 .
15.
Kotlikopp, Laurence (1989), What Determines Savings?Cambridge MA: The MIT Press .
16.
Lahiri, A. (1989), ‘ Dynamics of Asian Saving ’, IMF Staff Papers, 36: 228–61 .
17.
Loayza, R. , K. Schmidt-Hebbel and L. Serven (2000), ‘ What Drives Private Saving Across the World? ’, The Review of Economics and Statistics, LXXXII(2): 165–81 .
18.
Lucas, R. (1988), ‘ On the Mechanics of Economic Development ’, Journal of Monetary Economics, 22 (1): 3–42
19.
MacKinnon, J. (1990), ‘Critical Values for Cointegration Tests’, Working Paper, University of San Diego .
20.
Masson, P. , T. Bayoumi and H. Samlel (1998), ‘ International Evidence on the Determinants of Private Saving ’, World Bank Economic Review, 12 (3): 483–501 .
21.
McKinnon, R. (1991), The Order of Economic Liberalization: Financial Control in the Transition to the Market Economy. Baltimore: John Hopkins Press .
22.
McKinnon, R.I. (1973), Money and Capital in Economic Development. Washington D.C: The Brookings Institute .
23.
Modigliani, F. (1970), ‘The Life Cycle Hypothesis of Saving and Inter-Country Differences in the Saving Ratio’, in “ W. Eltis , M. Scott and J. Wolfe (eds), Induction, Growth and Trade, pp. 197–225. London: Oxford University Press .
24.
Nelson, C. and C. Plosser . (1982), ‘ Trends and Random “Walks in Macroeconomic Time Series: Some Evidence and Implications ’, journal of Monetary Economics, 10 (2): 130–62 .
25.
Phillips, P. (1987), ‘ Time Series Regression with Unit Roots ’, Econometrica, 55 (2): 277–301 .
26.
Phillips, P. and P. Perron . (1988), ‘ Testing for a Unit Root in Time Series Regression ’, Biometrica, 75 (2): 335–46 .
27.
Romer, P. (1986), ‘ Increasing Returns and Long Run Growth ’, journal of Political Economy, 94 (5): 1002–37 .
28.
Shaw, E. (1973), Financial Deepening in Economic Development. New York: Oxford Economic Press .
29.
Solow, R. (1956), ‘ A Contribution to the Theory of Economic Growth ’, Quarterly journal of Economics, 70 (1): 65–94 .
