- International Monetary Fund
- Published Date:
- March 1990
The saving data discussed in this paper are, as noted in Section II of Part Two, based on a standard definition derived from national income accounts.38 This appendix examines some of the conceptual problems associated with this definition and considers two interrelated issues: (1) whether there are alternative measures of saving that might be preferable and (2) if so, whether the use of these alternative measures would significantly alter the perception that there has been a widespread and prolonged decline in national saving rates.
In the United Nations’ System of National Accounts (SNA), saving for each sector—households, enterprises, and government—is calculated residually by subtracting current outlays from income. At the national level, gross saving is equal to GNP plus net current transfers from abroad, less final consumption (including government consumption). This residual is also equal to gross domestic investment plus the external current account balance (plus any statistical discrepancy between total expenditure and total output). Net saving is defined equivalently, but based on net output and domestic investment net of capital consumption allowances (depreciation).
Not all countries have adopted the United Nations system: a number of European countries use the European System of Accounts (ESA) and the United States has developed its own system of National Income and Product Accounts (NIPA). As pointed out by Blades (1982), all of the systems used by industrial countries define current income and outlays (and therefore gross saving) similarly to the SNA. One major difference is that the U.S. NIPA system treats all government expenditure as current consumption, whereas the SNA treats government construction and purchases of nonmilitary equipment as capital expenditures. In addition, as noted below, there are significant differences in the calculation of depreciation charges.39
As discussed in the following subsections, several issues related to the measurement of income and investment are difficult to resolve at either a theoretical or an empirical level. First, there are measurement problems that cause income (and thereby saving) to be generally underestimated in national accounts. Second, there are conceptual problems in defining income and saving, including the following: capital gains and losses, which change wealth, are not treated as income and do not affect measured saving; no distinction is made between real and nominal interest payments; and there are problems with the measurement of depreciation. Finally, the separation of consumption from capital expenditure is also problematic. Issues in this category include the treatment of purchases of consumer durables (with the exception of residential construction) as consumption rather than investment, and the absence of estimates for investment in research and development or in human capital.
The central feature of the national accounting approach to the measurement of saving is the treatment of saving as the difference between current income (excluding capital gains and losses) and current outlays. Any measurement errors in the calculation of income or consumption are translated directly into commensurate errors in saving. In this context, it should be noted that even relatively small errors in consumption and income could be quite large in relation to saving, given the relative magnitudes of these aggregates.40
Of particular concern are errors in measuring income. Because of the existence of “underground economy”—which encompasses all income that is unreported to avoid tax or to conceal illegal activities—the level of measured income is known to be underestimated in all countries. By its very nature, this underestimation is difficult to assess. Some researchers have concluded that the problem is not severe, 41 but others have found it to be quite substantial.42 Another underreporting problem arises from the global current account discrepancy. The rise in the discrepancy during the 1980s would be consistent with an increasing tendency for saving in industrial countries to be underestimated, although there are other plausible explanations as well. In any case, these measurement errors suggest—especially in view of the relatively small size of saving—that one should exercise caution in interpreting year-to-year fluctuations in saving.
Treatment of Capital Gains and Losses
The treatment of capital gains and losses is a major conceptual issue in the measurement of saving. As noted above, such changes in asset values are not included in the standard definitions of income and thus are implicitly excluded from saving as well. Consequently, measured saving may differ substantially from the change in net worth. Nonetheless, there are several reasons for concluding that the inclusion of valuation changes in the saving data would not necessarily contribute to an understanding of what has happened to saving in recent years.
One standard theoretical definition of income equates it to the maximum value that a household (or other economic unit) can consume during a given period while remaining as well off as it was at the beginning of the period.43
Income, by this concept, is the sum of consumption and any change in net worth, including capital gains or losses.44 Because capital gains have been very large in recent years, owing mainly to substantial increases in the prices of equities and real estate in many countries, inclusion of these gains in the measurement of saving would increase the level of saving and reduce its net decline in comparison with the standard measures.45
Chart 9, derived from Bradford (1989), plots net national saving for the United States based both on the standard NIPA measure and on changes in wealth. Bradford’s wealth data imply a higher net saving rate, but the downward secular trend is still evident.46 As the chart clearly illustrates, a major difficulty with proposals to include capital gains in saving is that they show high volatility from one year to the next. This volatility makes it unlikely that household or business saving decisions are influenced by capital gains or losses to the same extent as they are by ordinary income. That is, asset holders are likely to regard a substantial portion of valuation changes as temporary and thus as a poor substitute for saving as conventionally defined.47
Chart 9.United States: Net National Saving, 1949-87
Source: David F. Bradford, “Market Value vs. Financial Accounting Measures of National Saving,” NBER Working Paper, No. 2906 (Cambridge, Massachusetts: National Bureau of Economic Research, 1989).
A related point is that an increase in bond prices (associated with a drop in interest rates) may have little effect on bond owners, to the extent that they intend to hold the asset to maturity. Similarly, a rise in housing prices will have a relatively minor effect if it is temporary and if the home owner is unwilling to move; even if the increase is perceived as permanent, it could not be realized unless the home owner is prepared to move into lower-cost housing.
A final problem is that the adjusted data on government saving may be relatively more difficult to interpret as indicators of policy changes. For example, a recent study by Cox and Lown (1989) estimated that the U.S. fiscal balance, adjusted for capital gains and losses resulting from interest rate changes as well as for inflation, moved from a deficit of $260 billion in the fiscal year 1985/86 to a surplus of $11 billion in the fiscal year 1986/87. Normally, one would interpret such a movement as a sharp tightening of fiscal policy, but most analysts would be reluctant to draw such a conclusion for U.S. policy in 1987.
There is a general consensus that income should be adjusted to remove the inflation-compensating component of net interest receipts, although views differ on the method that should be used.48 In the standard measure of saving, interest receipts are included in income—and thus in saving—regardless of the expected inflation rate. That is, a rise in the rate of interest owing to a rise in expected inflation will add to recorded income, even though it will not add to the household’s real net worth, nor to its ability to consume.
As long as the expected inflation rate is positive, the treatment of all interest receipts as income will lead to an overstatement of saving for net creditors and to a corresponding understatement of saving for net debtors. In practical terms, this means that household and total private saving are overestimated, while corporate and government saving are underestimated.49 Depending on whether the country as a whole has a positive or negative net external asset position, the effect on net national saving would be positive or negative.
Dean and others (1989, Annex III) have estimated the effect of the inflation adjustment on household saving rates for several industrial countries. These estimates indicate that during periods of high inflation, household saving rates may be overestimated by several percentage points; for example, the gross household saving rate for the United States and the United Kingdom in 1980 are estimated to be overestimated by about 7 and 5½ percentage points, respectively. As inflation rates have diminished during the 1980s, the adjustments have become correspondingly smaller. Hence, this adjustment reduces the apparent downward trend in household saving rates, although the effects on total private or national saving rates would be much smaller.
Treatment of Depreciation
If saving is to be used as a measure of the change in net worth, then it is clearly net saving—gross saving minus depreciation (capital consumption) allowances—that is relevant. There are, however, reasons for skepticism regarding the data on net saving. It is therefore necessary to look at both gross and net data in order to assess trends and cross-country differences in saving rates.
There are three principal limitations to the available data on net saving. First, accurate measurement of economic depreciation is difficult at the aggregate (national) level, and national accounts measures are thought to be subject to wide margins of error. Second, international comparisons are problematic because the methods for measuring depreciation are not standardized across countries. For example, capital consumption is calculated on the basis of historical costs of capital in Japan, whereas it is based on replacement costs in the United States.50 Third, measured declines in net saving rates during the 1980s reflect in part a shift over time to investment in shorter-lived capital goods, especially in computers and related equipment, a process that has raised capital consumption allowances.51 In other words, this shift in the mix of investment has implied that a rising portion of gross investment is now allocated to replacement and that a higher level of investment would be required just to maintain the stock of capital. Whether this shift implies that a decline in net saving should be a matter of concern depends on a comparison of returns on old and new types of investment; if the rate of return on new equipment is high in relation to the returns on older structures, then the higher depreciation rates—and hence the decline in net relative to gross saving—may not be a problem.
Treatment of Consumer Durables
The convention in the SNA is to treat all consumer outlays for durable goods (except residential construction), as well as for nondurable goods and services, as current consumption.52 In principle, however, the figure for current outlays, which is subtracted from income to derive saving, should be limited to purchases of nondurable goods plus the flow of consumption services from durable goods. In practice, the latter figure is difficult to compute, and some outlays that should be treated as depreciable capital expenditures are treated instead as current consumption. It might be preferable to take the other extreme to that employed in the SNA and treat all durable purchases as capital expenditures, although this practice would understate consumption by ignoring the service flow from durable goods.53
Chart 10 illustrates the effect on gross national saving rates of treating all purchases of consumer durable goods as capital expenditures. This adjustment does not generally alter the trend of saving (nor the level of the saving-investment balance), but it does affect the cross-country comparisons somewhat. With the largest increase in measured saving rates occurring in the United States and the smallest in Japan, the adjusted data narrow the range of gross saving rates across countries.
Chart 10.Selected Major Industrial Countries: Gross National Saving Rates Adjusted to Include Consumer Durables, 1965–871
Source: Organization for Economic Cooperation and Development, National Accounts.
1 The adjusted data treat all purchases of consumer durables as investment; the standard data treat them as consumption.
Research and Development
In the SNA, research and development is treated as intermediate output and is thereby excluded from both investment and GDP. Blades (1982) estimated that for countries with large expenditures in this category—the Federal Republic of Germany, Japan, the United Kingdom, Belgium, the Netherlands, and Sweden—their inclusion would raise GDP by 1 percent to 2 percent. Other industrial countries would have rather smaller upward revisions. Inclusion of such expenditures as investment would thus tend to widen the estimated gaps between high-and low-saving countries.
Another type of expenditure that is commonly treated as current consumption, but that should in principle be treated as investment, is spending on human capital. The principal items in this category are education and training, but it could also include some research and development expenses, job search and hiring, expenditures that improve nutrition and health, and even some child-rearing expenses. The practical difficulty lies in separating the consumption and investment components of such expenditures. For example, what portion of medical outlays should be allocated to investment? Kendrick (1972) estimated that half of all medical expenditure should be treated as investment in human capital because of its “long-term benefits in terms of reduced mortality, disability, and debility” (p. 123). But that estimate is only a rough guess, and other categories are at least as problematic. Should all expenditure on education be treated as investment? How would one estimate the current service flows from such expenditures? These issues are very similar to those discussed above for the treatment of consumer durables, but here the measurement problems are even more daunting.
A number of studies have suggested that the magnitude of expenditures on human capital is substantial. At the high end of such estimates, Jorgenson and Fraumeni (1989) have calculated human capital investment in the United States to be about six times as much as physical investment, or more than total GNP as conventionally measured. This estimate is derived by computing investment in human capital as the value that it adds to the present value of expected lifetime labor earnings. Even the lower end of available estimates—such as Kendrick (1976), who measures human capital investment by allocating to it current expenditures on a number of categories—put such investment around the same magnitude as investment in physical capital.
For the present study, the key question regarding investment in human capital is not the magnitude of its level but whether it has risen or fallen in the 1980s. The most general approach to the treatment of human capital, favored by Jorgenson and Fraumeni, involves directly estimating the discounted present value of future labor income; saving allocated to human capital would be equal to the change in this value. The three components of this calculation are the current level of labor income, the expected growth rate of such income, and the rate at which future income is discounted to the present. The fact that productivity growth rates in industrial countries declined in the 1970s relative to the preceding two decades suggests that expected growth in labor income may also have declined, although it would have partially rebounded in the 1980s.54 In addition, real interest rates have generally been higher in the 1980s than earlier, suggesting that implicit discount rates may also have risen. Overall, it would seem reasonable to expect that the present value of human wealth has fallen relative to GNP since the early 1970s.
In view of the lack of reliable data, it would be premature to attempt to adjust national saving data to include investment in human capital. But there are two points that should be emphasized in this regard. First, it is clear that the conventional data omit substantial amounts of saving by treating outlays on human capital as consumption. Second, and what is more important, it is likely that expenditure on human capital has declined as a percentage of GNP in a number of industrial countries during the 1980s. It may also be noted that spending on education—perhaps the largest single component of investment expenditures on human capital—may have declined in relative terms in some industrial countries. For example, in the United States, government spending on education declined from 6 ½ percent of GNP in 1972 to 5¾ percent in 1987. It thus appears that the omission of human capital investment may understate the recent decline in saving rates.
In most developing countries, independent estimates of saving do not exist; total output is first split between consumption and investment according to end use, and total saving (including foreign saving) is then equated to total investment. The accuracy of saving estimates will therefore depend directly on the accuracy of the data on consumption and investment.
The consumption data in national income accounts cannot often be made to correspond to their appropriate theoretical counterparts, because information on the composition of consumption expenditures among services, nondurables, and durables are not readily available for the vast majority of developing countries. Physical investment, which consists of changes in inventories and fixed investment, also presents difficulties. Since inventories are often estimated on the basis of a few primary commodities, a downward bias is imparted to estimates of inventories as the manufacturing sector expands relative to the primary industry and as the ratio of inventories to fixed capital rises, both of which are typically observed in economic development (see Hooley, 1967). In addition, household inventory holdings—which are substantial in the rural sector—are excluded from measured inventories. Estimates of fixed investment are often made on the basis of imports of capital goods, after allowance for domestic construction activity. Overvalued exchange rates may lead to an understatement of imports and, thus, of both investment and saving.56 Furthermore, trade regimes that restrict imports of capital goods often result in heavy expenditures on equipment maintenance that extend the normal life of a capital good; these expenditures are excluded from measured investment (see Mamalakis, 1976).
Once aggregate saving is obtained from estimated aggregate investment, the total amount must be allocated among the saving components—foreign, public, and private. Foreign and public saving are calculated from balance of payments and public finance data. Private saving is then computed as a residual. If corporate balance sheets are available on a nationwide basis, private saving may be further subdivided into its business and household components. Household saving, being a residual among residuals, is likely to be subject to substantial measurement errors.57 On balance, there is substantial support for the view that data on saving, particularly private saving, may be understated to an extent that varies inversely with the level of development—the poorer the country, the more understated is its saving (Kuznets, 1960).58
The measurement of private saving in the form of foreign assets is even more problematic. In general, data on private capital flows in the balance of payments accounts of developing countries are weak, as the discussions of capital flight have shown.59 Such outflows, motivated by fears of potential capital losses arising from expropriation, taxation, or capital controls, are not recorded and need to be estimated indirectly. While estimates of capital flight have been made for a number of developing countries using a variety of methods, at this stage a great deal of confidence cannot be attached to any of the available measures. Furthermore, in many developing countries, because of the presence of exchange controls or because of the tax system, there is an incentive for agents to under-report or hide their holdings of foreign assets, thereby imparting a downward bias to the estimates. Obtaining a true measure of private capital flows is in most cases virtually impossible.
This appendix first compares the salient characteristics of “high-saver” countries with those of “low-saver” ones, and then reports the statistical results from estimating saving functions that test the relevance of these characteristics on the basis of a cross-section sample of 86 developing countries.
Profiles of High and Low Savers
For the first exercise, countries were classified arbitrarily into “high savers” and “low savers.” The former group includes countries with average saving rates of 20 percent or more of national income since the outbreak of the debt crisis in 1982, and the latter group consists of countries with saving rates of less than 20 percent. Roughly half of the sample of 112 countries were in each group. An examination of the stratified data reveals that the high savers as a group tended to have low inflation rates, higher growth rates, higher levels of per capita income, and lower dependency ratios, compared with the low savers. The potential role of these variables was noted in Section II of Part Three, but such comparisons cannot reveal whether these factors have independently influenced saving behavior.
To examine this issue more closely, a statistical analysis of the determinants of saving was conducted, incorporating as many of the relevant explanatory variables discussed in the text as possible. Unfortunately, data were not available for a number of variables, such as the distribution of income and the number of bank branches, for all the sample countries and over the same time period. The demographic variables on dependency and urbanization were provided by the World Bank, and a proxy for financial deepening was constructed. Taking into account data availability while seeking comprehensiveness, a final cross-section sample consisting of 86 developing countries60 was used to estimate a saving function of the form:
Except for per capita income and the dummy variable, all variables in the above regression equation were percentages, averaged over the period 1982–88. The demographic variables AGE/POP and URB/POP were averages over the period 1978–85. In preliminary runs, regional dummy variables and the rate of population growth61 were included, but were found to be statistically insignificant. Two other variables—the change in the urbanization rate and the proxy for financial deepening (M2/GNP)—were also found to have coefficients whose estimates were far from statistically significant; in fact, the coefficient of the financial variable had the wrong sign (negative).
The final saving function estimated is:62
Overall, the goodness-of-fit of the equation is fairly reasonable, with the coefficient of determination in the range typical of cross-country regressions. All the coefficients, except those for the level of per capita income and the rate of inflation, are statistically significant with the correct signs. Since theoretical considerations would hypothesize a positive sign for the income level and a negative sign for the inflation rate, even these variables turn out to be significant on the basis of one-sided statistical tests. Regarding the other variables, increases in output growth and in the weight of the working-age population tend to increase the saving ratio by making the young savers more affluent and numerous than the young savers of last period, who constitute the older dissavers of today. Moreover, favorable values of the terms of trade may be assumed to be associated by private agents with high levels of permanent income in this cross-section context, leading to an upward revision of consumption and, hence, to a decline in the saving ratio. Finally, it is significant that the effect of the debt overhang, as captured by the dummy variable, appears to be important; this coefficient indicates that a country that avoided debt-servicing difficulties would have an average saving ratio 5 percentage points higher, other things equal, than a country with debt problems.
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For another recent review of these issues, see Dean and others (1989).
The figures for current accounts do not balance because of the statistical discrepancy. Reflecting the rise in the world current account discrepancy, the strengthening of the aggregate current account balance of the developing countries falls short of the deterioration in the current account balance of the industrial countries.
With the adjustment described in footnote 3, the U.S. decline would be somewhat larger.
These projections are discussed in more detail in International Monetary Fund (1989).
See Ando and Modigliani (1963) and Modigliani (1970). Many features of the life-cycle model are also incorporated in the closely related permanent income theory (Friedman, 1957). For a detailed discussion of intergenerational issues in a life-cycle framework, see Kotlikoff (1989).
For a detailed discussion, see Barro (1989b), Bemheim (1989), and Gramlich (1989).
Barro (1989b, p. 38).
Duesenberry, however, argues (in his discussion of Summers and Carroll, 1987, p. 640) that this effect may have been offset by increased life expectancy. That is, even though the average person may now have a larger stock of wealth upon retirement, this stock must provide income over a longer expected life span.
This effect, known as the Harberger-Laursen-Metzler effect, is discussed and reviewed in Svensson and Razin (1983). In the original formulation, no distinction was made between temporary and permanent changes.
For a survey of this literature, see Smith (1989).
For a more detailed discussion of this issue, see Guidotti, Mathieson, and Zaidi (1989).
This criterion can be understood intuitively by noting that profits are the payoff from past saving and investment, while forgone consumption is the cost of saving and investment. If the payoff is always less than the cost, society never gets to enjoy the results of past saving and investment.
For a more complete review of these models, see Obstfeld (1989).
For a more detailed discussion of the international distribution of saving and investment, see Artis and Bayoumi (1989).
For a review, see Obstfeld (1986).
Ebrill and Evans (1988) find that this result does not hold for the United States and that both tax increases and spending cuts are reflected fully in rises in national saving.
For a review of the Fund’s advice on tax policy, see Tait (1989).
The double taxation of the earnings on capital implied by the corporate income tax makes this tax wedge even larger.
Policies to increase saving and investment are an integral part of Fund-supported adjustment programs. For a general discussion of saving mobilization and investment policies, see International Monetary Fund (1987).
This negative correlation between inflation and saving is consistent with alternative directions of causation: (1) inflation, via its adverse impact on macroeconomic stability and real interest rates, tends to depress saving; or (2) low saving, particularly public sector dissaving, results in high inflation.
The low-income group shown in Table 2 excludes China, whose average investment ratio was about 35 percent during 1982–88. With China included, the saving and investment trends are unchanged, but the domestic investment and national saving ratios during the post-debt-crisis period are 4—5 percentage points higher, reflecting the large weight of China in the computation of the group ratios.
This, of course, does not imply that low-income countries would be unable to generate additional saving. It merely suggests that the effort required to secure an increase in household saving is larger when household incomes are low.
Income taxation tends to stabilize household disposable income by shifting some of the income variation to the public sector.
The econometric estimates reported in Appendix III show some evidence of the negative relationship between inflation (an indicator of macroeconomic instability) and national saving.
In effect this means that the life-cycle model would provide a less adequate description of consumption behavior for such households than would models with longer horizons. One implication is that a “bequest motive” for saving would become more important than a “retirement motive,” for example.
While such factors may indeed be important in explaining differences in saving behavior across countries, they are less likely to play significant roles in changing saving behavior in individual countries over time, which is the more relevant issue from a policy perspective.
As regards the composition of taxes, greater concentration on a few sources of tax revenue in these countries may seriously distort the allocation of saving. However, cross-country differences permit few generalizations in this area.
The degree of international capital mobility may itself be a function of national saving. Countries that have built up equity through higher saving and have more stable economies enjoy smaller risk premiums and have greater access to international capital markets.
See International Monetary Fund (1988a), Supplementary Note 5. The sample includes all developing countries except the eight major oil exporters in the Middle East.
The evidence suggests that a once-and-for-all increase of 10 percentage points in the saving rate would raise the average growth rate of per capita real GNP in developing countries by 1.2 percentage points a year an effect broadly similar to an increase of equal magnitude in the investment rate. This result independently confirms the close relationship between domestic investment and national saving discussed in the section on “Fiscal Policy” below.
For a more detailed discussion of these policies see International Monetary Fund (1987).
This section examines the effect on saving of an exchange rate devaluation taken in isolation. Repeated exchange rate changes, on the other hand, are symptomatic of generalized macroeconomic instability, which may exert its own (negative) effects on national saving and domestic investment.
Note that this correlation may also arise because of the association between macroeconomic imbalances and price distortions, particularly the negative association between high inflation rates and growth, as well as financial repression.
This Appendix is based largely on research conducted by Yuzo Handa.
In addition, estimates of household saving may reflect errors that arise from the treatment of the household sector as a residual between national data and data collected for the government and enterprise sectors.
See Blades (1982), who discusses the self-balancing and cross-checking that reduces underreporting in national accounts. Holloway (1989) discusses the adjustments for underreporting that are made in the U.S. NIPA data.
For example, see Feige (1985), who concludes that actual income in the United States may be as much as 40 percent higher than the official data show. More moderately, Tanzi (1983) estimates that the U.S. underground economy in 1980 may have been 4—6 percent of GNP, but he also notes that some of that activity could have been included in the national accounts. Estimates for a number of countries are discussed in Tanzi (1982).
This definition, which was suggested by Hicks (1946), is discussed by Blades (1989).
Recent research that links saving to changes in net worth includes Auerbach (1985), Boskin (1988), Bradford (1989), and Shoven (1984). For a discussion of this and other concepts of saving, see Hendershott and Peek (1985a).
Barro (1989b) argues that the saving rate in the United States is not low if it is measured as the change in the real market value of assets. Similarly, Dewald and Ulan (1989) argue that the measured decline in net national saving in the United States (i.e., the current account deficit that has emerged since 1982) is mostly an illusion that disappears when capital gains on direct investment are included. For opposing views, see Summers and Carroll (1987) and Bosworth (1989).
The NIPA saving rate averages 6.5 percent of GNP over the period 1949–87; Bradford’s rate averages 9.6 percent. In a simple linear regression against time, the NIPA saving rate has a negative trend coefficient of 0.11 percent per annum; Bradford’s rate declines at a rate of 0.24 percent, albeit with a much larger variance.
See Hendershott and Peek (1989).
Jump (1980) and Hibbert (1983) show the importance of this factor in helping to explain increases in private saving and decreases in government saving in the 1970s. Jump used data for the United States, and Hibbert’s study used data for six industrial countries.
For discussions of these measurement issues, see Blades and Sturm (1982) and Hayashi (1986).
Purchases of new residential structures are treated as investment, and an imputation is made for the value of consumption of services from owner-occupied housing.
Alternatively, the flow of consumption services on durable goods could be added back into consumption by using estimated depreciation of the stock of consumer goods as a proxy. This imputation, which has not been made here because of data limitations, would leave the level of saving unchanged, because the flow of services would be added to income as well. The ratio of saving to income would, however, be lower.
Developments in productivity growth are discussed in International Monetary Fund (1988b), Annex II.
This Appendix draws heavily from the excellent reviews by Gersovitz (1988) and Deaton (1989).
Overvalued exchange rates, high tariffs, and exchange controls exert two opposite effects on the valuation of imports. Imports are made artificially cheap, smuggling is promoted, and the value of imports is underdeclared. On the other hand, importers may overinvoice imports in order to keep funds overseas, thereby creating an upward bias in import statistics. Based on direction-of-trade statistics, Hooley (1967) found a positive correlation between overvalued exchange rates and the understatement of imports. Because of the import intensity of investment (relative to consumption), these factors result in a relative underestimate of investment and saving rates.
In some countries, household saving data can be derived from consumer expenditure surveys. Aside from being available only for isolated years, such surveys also typically show negative saving for most income groups. For these reasons survey data are seldom used for macroeconomic analysis.
In addition to these problems, saving data for developing countries also suffer from the shortcomings already discussed with regard to industrial countries—for example, the treatment of education expenditures as consumption.
The geographic distribution was as follows: Africa, 35; Asia, 20; Western Hemisphere, 20; Europe, 6; and Middle East, 5.
In lieu of the dependency ratio.
t-values are reported in parentheses below the coefficients; R2 is the coefficient of determination; and SE is the standard error of the estimated equation.
Recent Occasional Papers of the International Monetary Fund
49. Islamic Banking, by Zubair Iqbal and Abbas Mirakhor. 1987.
50. Strengthening the International Monetary System: Exchange Rates, Surveillance, and Objective Indicators, by Andrew Crockett and Morris Goldstein. 1987.
51. The Role of the SDR in the International Monetary System, Studies by the Research and Treasurer’s Departments of the International Monetary Fund. 1987.
52. Structural Reform, Stabilization, and Growth in Turkey, by George Kopits. 1987.
53. Floating Exchange Rates in Developing Countries: Experience with Auction and Interbank Markets, by Peter J. Quirk, Benedicte Vibe Christensen, Kyung-Mo Huh, and Toshihiko Sasaki. 1987.
54. Protection and Liberalization: A Review of Analytical Issues, by W. Max Corden. 1987.
55. Theoretical Aspects of the Design of Fund-Supported Adjustment Programs: A Study by the Research Department of the International Monetary Fund. 1987.
56. Privatization and Public Enterprises, by Richard Hemming and Ali M. Mansoor. 1988.
57. The Search for Efficiency in the Adjustment Process: Spain in the 1980s, by Augusto Lopez-Claros. 1988.
58. The Implications of Fund-Supported Adjustment Programs for Poverty: Experiences in Selected Countries, by Peter S. Heller, A. Lans Bovenberg, Thanos Catsambas, Ke-Young Chu, and Parthasarathi Shome. 1988.
59. Measurement of Fiscal Impact: Methodological Issues, edited by Mario I. Blejer and Ke-Young Chu. 1988.
60. Policies for Developing Forward Foreign Exchange Markets, by Peter J. Quirk, Graham Hacche, Viktor Schoofs, and Lothar Weniger. 1988.
61. Policy Coordination in the European Monetary System. Part I: The European Monetary System: A Balance Between Rules and Discretion, by Manuel Guitián. Part II: Monetary Coordination Within the European Monetary System: Is There a Rule? by Massimo Russo and Giuseppe Tullio. 1988.
62. The Common Agricultural Policy of the European Community: Principles and Consequences, by Julius Rosenblatt, Thomas Mayer, Kasper Bartholdy, Dimitrios Demekas, Sanjeev Gupta, and Leslie Lipschitz. 1988.
63. Issues and Developments in International Trade Policy, by Margaret Kelly, Naheed Kirmani, Miranda Xafa, Clemens Boonekamp, and Peter Winglee. 1988.
64. The Federal Republic of Germany: Adjustment in a Surplus Country, by Leslie Lipschitz, Jeroen Kremers, Thomas Mayer, and Donogh McDonald. 1989.
65. Managing Financial Risks in Indebted Developing Countries, by Donald J. Mathieson, David Folkerts-Landau, Timothy Lane, and Iqbal Zaidi. 1989.
66. The European Monetary System in the Context of the Integration of European Financial Markets, by David Folkerts-Landau and Donald J. Mathieson. 1989.
67. The Role of National Saving in the World Economy: Recent Trends and Prospects, by Bijan B. Aghevli, James M. Boughton, Peter J. Montiel, Delano Villanueva, and Geoffrey Woglom. 1990.
Note: For information on the titles and availability of Occasional Papers published prior to 1987, please consult the most recent IMF Publications Catalog or contact IMF Publication Services.