Publication: The Savings Collapse during the Transition in Eastern Europe
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2000-08
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2015-02-02
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The authors assess the presence and extent of involuntary savings by comparing the predicted savings rates of market economies with those of the pre-transition economies. On balance, predicted savings rates fell short of actual savings rates, especially for the former Soviet Union and the Baltics -- providing some support for the notion of excessive pre-transition savings. Comparing the savings behavior of market economies and transition economies, they found substantial similarities, except for a negative link between savings and GDP growth. As the fastest-growing transition economies are at the bottom of the adjustment J-curve, the finding is consistent with consumption smoothing. Finally, they explored whether differences in the extent of economic liberalization affected savings rates in the cross-section of transition economies. They found that liberalization is associated with lower savings, with a one-year lag. To the extent that liberalization is perceived as an indicator of likely future growth, this behavior is consistent with smoothing in the face of a J-curve change in output.
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“Denizer, Cevdet; Wolf, Holger C.. 2000. The Savings Collapse during the Transition in Eastern Europe. Policy Research Working Paper;No. 2421. © http://hdl.handle.net/10986/21375 License: CC BY 3.0 IGO.”
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