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Inter-American Development Bank Office of the Chief Economist Working Paper 346 Saving Behavior in Latin America: Overview and Policy Issues

By Michael Gavin, Ricardo Hausmann and Ernesto Talvi

Abstract

The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank, or to any individual acting on its behalf. 1 1. Summary and Conclusions This paper presents an alternative perspective on the relationship between saving and growth; saving and inflation stabilization; saving and structural reform; and saving and capital inflows; drawing on the experience of East Asia and Latin America in the last twenty five years. 1 The paper’s perspectives on saving are based on the following evidence: i) higher growth precedes higher saving, rather than the reverse. It is only after a sustained period of high growth that saving rates increase and may do so with a delay that can be quite significant. ii) the most powerful determinant of saving over the long run is economic growth. According to this view, Latin America's chronically low rate of saving is primarily the consequence, more than the cause, of the region's history of low and volatile economic growth, while the high saving observed in the Asian "miracle " economies is due to their high and less volatile rate of economic growth. iii) stabilization and reform policies aimed at raising efficiency and promoting growth may, although temporarily, reduce saving rates for many years and therefore, increase the reliance of the economy on potentially volatile capital flows. iv) when properly measured, capital inflows are associated with declines in saving which are similar i

Topics: growing economies Hong Kong, Indonesia, Korea, Malaysia
Year: 1997
OAI identifier: oai:CiteSeerX.psu:10.1.1.195.6993
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