Private saving, interest rates and liquidity constraints in LDCs: recent evidence

Alejandro Villagomez

Applied Economics, 1997, vol. 29, issue 5, 607-615

Abstract: There is still considerable controversy about the interest rate responsiveness of private saving in developing countries. This paper provides recent evidence based on individual country estimations for a sample of 16 countries. The model used here follows the 'uler equation approach' and includes rational and forward-looking permanent income consumers together with liquidity-constrained consumers. Overall, for this sample of countries the results obtained in this paper offer new evidence of a low responsiveness of saving to changes in the interest rate. My results also support a strong role of liquidity constraints in these countries.

Date: 1997
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DOI: 10.1080/000368497326804

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