Saving in Sub-Saharan Africa

Ernest Aryeetey and Christopher Udry ()

CID Working Papers from Center for International Development at Harvard University

Abstract: Gross domestic savings in Africa averaged only 8 percent of GDP in the 1980s, compared to 23 percent for Southeast Asia and 35 percent in the Newly Industrialized Economies. Aside from being generally low, saving rates in most of Africa have shown consistent decline over the last thirty years. These savings figures must be considered tentative, because they are derived as a residual in the national accounts from expenditure and production data that are themselves quite unreliable. Notwithstanding the problems of measurement, it is clear that savings are dominated by household savings. Survey evidence in turn shows that household savings are primarily in the form of non-financial assets. Financial savings are predominantly directed to informal markets and institutions. The paper documents these trends and provides a simple model of portfolio allocation to guide future research. It is suggested that an array of transaction costs associated with formal financial markets, coupled with the risk management strategies and production activities of households in Africa account for the patterns of saving and portfolio allocation observed in the data.

Keywords: saving; Africa; household savings; transactions costs; risk management (search for similar items in EconPapers)
JEL-codes: O16 O55 O17 D12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev
Date: 2000-01
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Persistent link: http://EconPapers.repec.org/RePEc:wop:cidhav:38

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