Abstract

© 1990 International Monetary Fund

Copyright

© 1990 International Monetary Fund

Library of Congress Cataloging-in-Publication Data

The Role of national saving in the world economy: recent trends and prospects / by Bijan B. Aghevli . . . [et al.].

p. cm.—(Occasional paper : no. 67)

Includes bibliographical references.

ISBN 1-55775-134-X

1. Saving and investment. 2. Saving and investment—Developing countries. 3. International economic relations. 4. Economic history—1971– I. Aghevli, Bijan B. II. Series: Occasional paper (International Monetary Fund) : no. 67.

HC79.S3R64 1990

332’.042—dc20

89-71674

CIP

Price: US$10.00

(US$7.50 university faculty members and students)

Address orders to:

External Relations Department, Publication Services

International Monetary Fund, Washington, D.C. 20431

Contents

  • Preface

  • PART ONE General Introduction and Summary

    • I. Overview

    • Industrial Countries

    • Developing Countries

  • PART TWO Industrial Countries

    • I. Trends in National Saving

    • Overview of Major Developments

    • International Comparisons

    • Projections

    • II. Determinants of Saving

    • Government Saving

    • Age Structure of the Population

    • Income and Productivity Growth

    • Wealth Revaluation

    • Pension Plans and Insurance

    • Relative Prices

    • Interest Rates and Inflation

    • Enterprise Saving

    • Financial Liberalization

    • III. Adequacy of Saving

    • Growth Models with Exogenous Technical Progress

    • Growth Models with Endogenous Technical Progress

    • IV. International Distribution of Saving and Investment

    • Saving, Investment, and Current Account Balances

    • Implications of Current Account Imbalances

    • V. Policy Options

    • Budget Policy

    • Tax Policy

      • Comprehensive Reform

      • Tax Incentives to Encourage Saving

      • Removing Tax Incentives that Encourage Borrowing

      • International Dimension to Saving and Investment Policies

      • Conclusions

    • PART THREE Developing Countries

      • I. Trends in National Saving

      • II. Determinants of Saving

      • Private Saving

        • Household Resources

        • Time Profile of Income Streams

        • Household Preferences

        • Intertemporal Rates of Return

        • Aggregate Household Saving

      • Public Saving

      • Interactions Between Public and Private Saving

      • III. Saving, Investment, and Growth

      • The Saving-Investment Relationship

      • Effects of Saving and Investment on Growth

      • Direction of Causation Among Saving, Investment, and Growth

      • IV. Policy Determinants of Saving and Investment

      • Fiscal Policy

      • Credit Policy

      • Exchange Rate Policies

      • Interest Rate Policy and Financial Liberalization

      • Conclusions

      • Appendices

      • I. Measurement of Saving in Industrial Countries

      • II. Measurement of Saving in Developing Countries

      • III. An Econometric Analysis of Saving in Developing Countries

      • Bibliography

      • TABLES

      • 1. Industrial Countries: Saving Rates by Sector, 1980–87

      • 2. Developing Countries: National Saving and Domestic Investment Rates and Growth, 1976–88

      • 3. Macroeconomic Balance of the Six Largest Latin American Countries, 1980–87

      • 4. Saving-Investment Correlations in Developing Countries

      • 5. Capital Importing Developing Countries: Contribution of Capital to Growth, 1974–87

      • 6. Factors Determining Growth in Fifty-Five Developing Countries, 1970–85

      • CHARTS

      • 1. Industrial Countries: Gross and Net National Saving Rates, 1965–87

      • 2. Selected Major Industrial Countries: Gross Saving Rates by Sector, 1965–87

      • 3. Selected Major Industrial Countries: Net Saving Rates by Sector, 1965–87

      • 4. Industrial Countries: Gross National Saving, Gross Domestic Investment, and Current Account Balance, 1965–87

      • 5. Industrial Countries: Gross National Saving

      • 6. Selected Major Industrial Countries: National, Private, and General Government Gross Saving Rates, 1965–87

      • 7. Selected Major Industrial Countries: Private, Household, and Enterprise Sectors’ Gross Saving Rates, 1965–87

      • 8. Selected Major Industrial Countries: Gross National Saving, Domestic Investment, and Current Account Balance, 1965–87

      • 9. United States: Net National Saving, 1949–87

      • 10. Selected Major Industrial Countries: Gross National Saving Rates Adjusted to Include Consumer Durables, 1965–87

The following symbols have been used throughout this paper:

  • ... to indicate that data are not available;

  • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

  • – between years or months (e.g., 1987–88 or January–June to indicate the years or months covered, including the beginning and ending years or months;

  • / between years (e.g., 1987/88) to indicate a crop or fiscal (financial) year.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.

Preface

This study was prepared in the Research Department of the International Monetary Fund. Its authors are Bijan B. Aghevli, Senior Advisor; James M. Boughton, Advisor; Peter J. Montiel, Assistant Chief of the Developing Country Studies Division; Delano Villanueva, Senior Economist in the Developing Country Studies Division; and Geoffrey Woglom, Professor of Economics at Amherst College, who was serving as Visiting Scholar in the Research Department while working on this project.

The study benefited greatly from comments and suggestions from Fund colleagues who are too numerous to be all identified, but special mention should be made of Yuzo Harada, who provided substantial input into the study, as well as Tamim A. Bayoumi, Daniel Alan Citrin, Sharmini A. Coorey, and Owen Evans, who prepared excellent background material. In addition, Maurice Obstfeld and Douglas D. Purvis made substantial contributions while they were Visiting Scholars in the Research Department. The paper was edited by Esha Ray of the External Relations Department. The authors alone are responsible for the study; the opinions expressed are theirs and do not necessarily reflect the views of the Fund. The study was completed in August 1989 and reflects developments up to that time.

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