Publication: Solow in Transition : Macro and Micro Determinants of Savings in Armenia
Loading...
Date
2013-07
ISSN
Published
2013-07
Author(s)
Diaby, Mohamed
Editor(s)
Abstract
This paper analyzes and reconciles macro and micro evidence on savings and factors that affect savings, as well as possible policy implications. At the aggregate level, the main question is how savings are affected by growth and macroeconomic policies and variables (fiscal policy, exchange rate, for example) and the breadth of financial markets. Some of these macro determinants can be reconciled with microeconomic evidence of the savings behavior of households. Using macroeconomic quarterly data and household survey data, the analysis explores the determinants of the savings rate at the macroeconomic and microeconomic levels, using the typical econometric models used in the literature (long-term co-integration relation and short-term error correction model for the macro determinants; linear multivariate models for the micro determinants). The long-term relationship indicates that a 10-percent increase in gross domestic product per capita would add 3.7 percentage points to the savings rate in the long run. The short-term relationship depicts a strong catch-up process to the long-run equilibrium, with quarterly changes in gross domestic product per capita and openness strongly correlated with quarterly changes in the savings rate. The characteristics of households that represent the volatility of expected income, such as education and access to borrowing or remittances, significantly impact saving rates. The macroeconomic and microeconomic analyses of the determinants of saving rates in Armenia point to three policy areas: the macroeconomic environment, the financial sector, and the role of remittances.
Link to Data Set
Citation
“Diaby, Mohamed; Coulibaly, Souleymane. 2013. Solow in Transition : Macro and Micro Determinants of Savings in Armenia. Policy Research Working Paper;No. 6531. © World Bank. http://hdl.handle.net/10986/15889 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Geopolitics and the World Trading System(Washington, DC: World Bank, 2024-12-23)Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication From Patriarchy to Policy(Washington, DC: World Bank, 2025-05-29)Legal institutions play an important role in shaping gender equality in economic domains, from inheritance to labor markets. But where do gender equal laws come from? Using cross-country data on social norms and legal equality, this paper investigates the socio-cultural roots of gender inequity in the legal system and its implications for female labor force participation. To identify the impact of social norms, the analysis uses an empirical strategy that exploits pre-modern differences in ancestral patriarchal culture as an instrument for present-day gender norms. The findings show that ancestral patriarchal culture is a strong predictor of contemporary norms, and conservative social norms are associated with more gender inequality in the de jure legal framework, the de facto implementation of laws, and the labor market. The paper presents evidence for a political selection mechanism linking norms to laws: countries with more conservative norms elect political leaders who are more hostile to gender equality, who then pass less progressive legislation. The results highlight the cultural roots and political drivers of legalized gender inequality.Publication Global Socio-economic Resilience to Natural Disasters(Washington, DC: World Bank, 2025-05-22)Most disaster risk assessments use damages to physical assets as their central metric, often neglecting distributional impacts and the coping and recovery capacity of affected people. To address this shortcoming, the concepts of well-being losses and socio-economic resilience—the ability to experience asset losses without a decline in well-being—have been proposed. This paper uses microsimulations to produce a global estimate of well-being losses from, and socio-economic resilience to, natural disasters, covering 132 countries. On average, each $1 in disaster-related asset losses results in well-being losses equivalent to a $2 uniform national drop in consumption, with significant variation within and across countries. The poorest income quintile within each country incurs only 9% of national asset losses but accounts for 33% of well-being losses. Compared to high-income countries, low-income countries experience 67% greater well-being losses per dollar of asset losses and require 56% more time to recover. Socio-economic resilience is uncorrelated with exposure or vulnerability to natural hazards. However, a 10 percent increase in GDP per capita is associated with a 0.9 percentage point gain in resilience, but this benefit arises indirectly—such as through higher rate of formal employment, better financial inclusion, and broader social protection coverage—rather than from higher income itself. This paper assess ten policy options and finds that socio-economic and financial interventions (such as insurance and social protection) can effectively complement asset-focused measures (e.g., construction standards) and that interventions targeting low-income populations usually have higher returns in terms of avoided well-being losses per dollar invested.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Characterizing the Business Cycles of Emerging Economies(2010-06-01)Using the dating algorithm by Harding and Pagan (2002) on a quarterly database for 23 emerging market economies (EMEs) and 12 developed countries over the period 1980.Q1 - 2006.Q2, the authors proceed to characterize and compare the business cycle features of these two groups. They first find that recessions are deeper and more frequent among EMEs (especially, among LAC countries) and that expansions are more sizable and longer (especially, among East Asian countries). After this characterization, this paper explores the linkages between the cost of recessions (as measured by the average annual rate of output loss in the peak-to-trough phase of the cycle) and several country-specific factors. The main findings are: (a) adverse terms of trade shocks raises the cost of recessions in countries with a more open trade regime, deeper financial markets and, surprisingly, a more diversified output structure. (b) U.S. interest rate shocks seem to have a significant impact on the cost of recessions in East Asian countries. (c) Recessions tend to be deeper if they coincide with a sudden stop, but the effect tends to be mitigated in countries with deeper domestic credit markets. (d) Countries with stronger institutions tend to have less costly recessions.Publication Rethinking Multipliers in a Globalized World(2010-04-01)This paper uses the central tool of an investment-savings and monetary-policy model with an augmented Philips curve and presents a few extensions of that model to analyze the multiplier effects of macroeconomic policies in the United States. In doing so, the authors incorporate realistic assumptions in the model related to the recent financial characteristics of the global economy. The monetary policy reaction function embeds a new augmented Taylor-rule incorporating housing and stock prices and the credit lending rate. And the household consumption and firm investment decisions incorporate housing and stock assets and the credit market frictions. The equilibrium income is derived and compared with the actual nominal gross domestic product of the United States for the period 1990 to 2009. More importantly, fiscal and trade multipliers are derived and discussed. The main finding is that government spending, tax cut, and trade multipliers are relatively smaller in size when more realistic features are incorporated in the model. The model simulation shows that the model can track actual gross domestic product reasonably well. The model should be further improved before it could be used for policy exercises.Publication Oil Rules : Kazakhstan's Policy Options in a Downturn(Washington, DC, 2013)This report assesses the role of fiscal rules for countercyclical economic management in Kazakhstan and simulates the behavior of different types of fiscal rules. The work represents technical assistance to the ministry of economy and budget planning and has been financed by the joint economic research program between the government of Kazakhstan and the World Bank. Kazakhstan adopted a fixed fiscal rule in 2010 and introduced changes to it in 2012. By keeping the annual amount transferred from the fund to the budget constant, Kazakhstan's rule is more stringent than pure application of the permanent rule will imply. This report's five chapters outline the advantages of Kazakhstan's current fiscal rule and its performance against other types of rules. Chapter one reviews the performance of the Kazakh economy and the policy stance of the authorities over the last 10 years. Chapter two argues that fiscal rules should be simple and transparent; presenting evidence that Kazakhstan's current fiscal rule meets these two criteria. Chapter three presents the results of simulations of different global economic scenarios and the expected impacts on key variables in Kazakhstan, considering scenarios as elected in close consultation with the Kazakh authorities. Chapter four uses the results of these simulations to test the performance of different types of fiscal rules. Chapter five responds to a government request to review the literature on the use of fiscal and monetary policy for countercyclical economic management.Publication Capital Will Not Become More Expensive as the World Ages(World Bank Group, Washington, DC, 2014-07)Aging of populations and convergence between developed and developing countries in per capita incomes are shaping the evolution of saving, investment, capital flows, and, in particular, the cost of capital. When considering these trends, the existing literature argues for either continued, low interest rates, or sharply rising ones. This paper presents an alternative view: modest rises in interest rates, which result from a combination of increases in the global weight of high-saving developing economies (limiting declines in global saving), and decelerations in the rate of growth in developing countries (constraining upward pressure in global investment). For the majority of countries, slowing capital demand resulting from decelerating growth, coupled with structural changes that influence its attractiveness as a destination for capital, moderate increases in interest rates. Changes in key assumptions do not alter this view. More specifically, the small rise in interest rates persists even in a scenario where growth in developing countries decelerates more slowly, or when elasticities governing the behavior of saving and investment are varied.Publication Lebanon Economic Monitor, Spring 2014(Washington, DC, 2014-04)Lebanon faces serious challenges from a volatile security environment and spillovers from the ongoing Syrian conflict which pose serious risks to an already fragile internal political situation. Security incidents have become increasingly more common and the volatile security environment is weakening consumer and investor sentiments and adversely affecting tourism, a central contributor to economic growth and employment in Lebanon. The influx of Syrian refugees to Lebanon persists, with officially registered refugees reaching close to 1 million (i.e., 21.6 percent of Lebanon’s pre-conflict population), which poses significant fiscal, health and educational challenges.
Users also downloaded
Showing related downloaded files
Publication Remarks at the United Nations Biodiversity Conference(World Bank, Washington, DC, 2021-10-12)World Bank Group President David Malpass discussed biodiversity and climate change being closely interlinked, with terrestrial and marine ecosystems serving as critically important carbon sinks. At the same time climate change acts as a direct driver of biodiversity and ecosystem services loss. The World Bank has financed biodiversity conservation around the world, including over 116 million hectares of Marine and Coastal Protected Areas, 10 million hectares of Terrestrial Protected Areas, and over 300 protected habitats, biological buffer zones and reserves. The COVID pandemic, biodiversity loss, climate change are all reminders of how connected we are. The recovery from this pandemic is an opportunity to put in place more effective policies, institutions, and resources to address biodiversity loss.Publication South Asia Development Update, April 2024: Jobs for Resilience(Washington, DC: World Bank, 2024-04-02)South Asia is expected to continue to be the fastest-growing emerging market and developing economy (EMDE) region over the next two years. This is largely thanks to robust growth in India, but growth is also expected to pick up in most other South Asian economies. However, growth in the near-term is more reliant on the public sector than elsewhere, whereas private investment, in particular, continues to be weak. Efforts to rein in elevated debt, borrowing costs, and fiscal deficits may eventually weigh on growth and limit governments' ability to respond to increasingly frequent climate shocks. Yet, the provision of public goods is among the most effective strategies for climate adaptation. This is especially the case for households and farms, which tend to rely on shifting their efforts to non-agricultural jobs. These strategies are less effective forms of climate adaptation, in part because opportunities to move out of agriculture are limited by the region’s below-average employment ratios in the non-agricultural sector and for women. Because employment growth is falling short of working-age population growth, the region fails to fully capitalize on its demographic dividend. Vibrant, competitive firms are key to unlocking the demographic dividend, robust private investment, and workers’ ability to move out of agriculture. A range of policies could spur firm growth, including improved business climates and institutions, the removal of financial sector restrictions, and greater openness to trade and capital flows.Publication The Journey Ahead(Washington, DC: World Bank, 2024-10-31)The Journey Ahead: Supporting Successful Migration in Europe and Central Asia provides an in-depth analysis of international migration in Europe and Central Asia (ECA) and the implications for policy making. By identifying challenges and opportunities associated with migration in the region, it aims to inform a more nuanced, evidencebased debate on the costs and benefits of cross-border mobility. Using data-driven insights and new analysis, the report shows that migration has been an engine of prosperity and has helped address some of ECA’s demographic and socioeconomic disparities. Yet, migration’s full economic potential remains untapped. The report identifies multiple barriers keeping migration from achieving its full potential. Crucially, it argues that policies in both origin and destination countries can help maximize the development impacts of migration and effectively manage the economic, social, and political costs. Drawing from a wide range of literature, country experiences, and novel analysis, The Journey Ahead presents actionable policy options to enhance the benefits of migration for destination and origin countries and migrants themselves. Some measures can be taken unilaterally by countries, whereas others require close bilateral or regional coordination. The recommendations are tailored to different types of migration— forced displacement as well as high-skilled and low-skilled economic migration—and from the perspectives of both sending and receiving countries. This report serves as a comprehensive resource for governments, development partners, and other stakeholders throughout Europe and Central Asia, where the richness and diversity of migration experiences provide valuable insights for policy makers in other regions of the world.Publication Media and Messages for Nutrition and Health(World Bank, Washington, DC, 2020-06)The Lao People’s Democratic Republic (Lao PDR) has experienced rapid and significant economic growth over the past decade. However, poor nutritional outcomes remain a concern. Rates of childhood undernutrition are particularly high in remote, rural, and upland areas. Media have the potential to play an important role in shaping health and nutrition–related behaviors and practices as well as in promoting sociocultural and economic development that might contribute to improved nutritional outcomes. This report presents the results of a media audit (MA) that was conducted to inform the development and production of mass media advocacy and communication strategies and materials with a focus on maternal and child health and nutrition that would reach the most people from the poorest communities in northern Lao PDR. Making more people aware of useful information, essential services and products and influencing them to use these effectively is the ultimate goal of mass media campaigns, and the MA measures the potential effectiveness of media efforts to reach this goal. The effectiveness of communication channels to deliver health and nutrition messages to target beneficiaries to ensure maximum reach and uptake can be viewed in terms of preferences, satisfaction, and trust. Overall, the four most accessed media channels for receiving information among communities in the study areas were village announcements, mobile phones, television, and out-of-home (OOH) media. Of the accessed media channels, the top three most preferred channels were village announcements (40 percent), television (26 percent), and mobile phones (19 percent). In terms of trust, village announcements were the most trusted source of information (64 percent), followed by mobile phones (14 percent) and television (11 percent). Hence of all the media channels, village announcements are the most preferred, have the most satisfied users, and are the most trusted source of information in study communities from four provinces in Lao PDR with some of the highest burden of childhood undernutrition.Publication Economic Recovery(World Bank, Washington, DC, 2021-04-06)World Bank Group President David Malpass spoke about the world facing major challenges, including COVID, climate change, rising poverty and inequality and growing fragility and violence in many countries. He highlighted vaccines, working closely with Gavi, WHO, and UNICEF, the World Bank has conducted over one hundred capacity assessments, many even more before vaccines were available. The World Bank Group worked to achieve a debt service suspension initiative and increased transparency in debt contracts at developing countries. The World Bank Group is finalizing a new climate change action plan, which includes a big step up in financing, building on their record climate financing over the past two years. He noted big challenges to bring all together to achieve GRID: green, resilient, and inclusive development. Janet Yellen, U.S. Secretary of the Treasury, mentioned focusing on vulnerable people during the pandemic. Kristalina Georgieva, Managing Director of the International Monetary Fund, focused on giving everyone a fair shot during a sustainable recovery. All three commented on the importance of tackling climate change.