DETERMINANTS OF THE PERCENTAGE OF SAVINGS IN EMERGING MARKETS: A PANEL DATA ANALYSIS APPROACH, 1995-2015

Kunofiwa Tsaurai

Applied Econometrics and International Development, 2018, vol. 18, issue 2, 25-40

Abstract: The current study investigated the determinants of the savings ratio to GDP in emerging markets using panel data analysis methods (pooled ordinary least squares, fixed and random effects) with data from 1995 to 2015. To the best of the author’s knowledge, there is no empirical study done so far which explored the determinants of the savings ratio in emerging markets as a bloc. What also triggered the author’s interest in the study is the absence in the literature of an agreeable list of determinants of savings, despite the availability of incontestable evidence on the savings-led growth nexus in the literature. In summary, the study finds that financial development had a significant negative impact on the savings ratio. To a larger extent, trade openness was also found to have had a significant positive influence on savings ratio in emerging markets. All other explanatory variables were found to be non-significant determinants of the savings ratio. We find a positive relationship between trade openness and the savings ratio. Emerging markets are urged to increase their savings per capita which may grow with the savings ratio and/or the increase of production per capita. They are also urged to deepen their bond sector, stock and money markets in order to ensure that economic agents get the highest possible return on their savings and investments. The availability of such viable investment options increases savings. Subject to data availability, future studies can investigate more macroeconomic variables to find out if they determine savings in the emerging markets.

Keywords: Savings; Foreign Direct Investment; Human Capital Development; Emerging Markets. (search for similar items in EconPapers)
Date: 2018
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