Saving behaviour in OECD countries: evidence from panel cointegration tests

Sarantis, Nick and Stewart, Chris (2001) Saving behaviour in OECD countries: evidence from panel cointegration tests. The Manchester School, 69(s1), pp. 22-41. ISSN (print) 1463-6786


We use recently developed panel cointegration and integration tests, which allow for heterogeneity in parameters and dynamics across countries, to examine the long-run determinants of aggregate private saving rates in a dynamic panel of OECD countries during the post Second World War period. These techniques are more powerful than the conventional tests and overcome the inconsistency problem of the fixed-effect estimator typically employed in cross-country studies of saving behaviour. We employ a number of alternative cointegration methods and also construct a private disposable income series, while previous studies on private savings tend to proxy income with GDP. We find strong evidence for the existence of a long-run equilibrium saving function based on an extended version of the life-cycle hypothesis which allows for the influence of liquidity constraints. Our results suggest a number of significant determinants of saving rates, but the parameter estimates vary significantly across countries.

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