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Private saving. New cross-country evidencebased on bayesian techniques

Ignacio Hernando, Irene Pablos, Daniel Santabárbara and Javier Valles
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Irene Pablos: European Central Bank

No 1802, Working Papers from Banco de España, Working Papers Homepage

Abstract: The existing literature exhibits high uncertainty over the theoretical and empirical determinants of private world saving. This paper reports new evidence on the drivers of private saving by applying Bayesian techniques, using data from the world’s 35 largest economies in the period 1980-2012. After reviewing the main theories of consumption and saving decisions, and discussing the potential effects of different determinants, we specify a general model that incorporates the most commonly used factors in the literature, considering the potential endogeneity of some of the regressors. The Bayesian Model Averaging (BMA) approach summarises the information embedded in all combinations of the explanatory variables considered by averaging each specification according to its likelihood. We find that in the medium term private credit to GDP ratio, the government surplus to GDP ratio, the terms of trade, life expectancy and the old-age dependency ratio are key determinants of cross-country private saving behaviour. Lastly, we assess the long-term effect of expected demographic changes in private saving globally.

Keywords: consumption; saving; national saving; private saving; household saving; Bayesian model averaging; model uncertainty (search for similar items in EconPapers)
JEL-codes: C11 C23 E21 H30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg and nep-mac
Date: 2018-01
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1802

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