Saving Tendency of Developed and Developing European Countries


Arıç K. H. , Sek S. K.

Ekonomika, vol.100, no.1, pp.139-155, 2021 (International Refereed University Journal)

  • Publication Type: Article / Article
  • Volume: 100 Issue: 1
  • Publication Date: 2021
  • Doi Number: 10.15388/10.15388/ekon.2021.1.8.
  • Title of Journal : Ekonomika
  • Page Numbers: pp.139-155

Abstract

. In previous literature studies, saving condition is mainly examined focusing on Developing and Asian countries. The analysis on the saving condition is crucial due to the linkages between saving accumulation and economic growth. The studies that focus on Developed countries are limited. This study extends the analysis by comparing the saving determination in Developed and Developing European countries and contributes to the literature on saving in two ways. First, the study compares two panel groups, Developed and Developing European countries, which might reveal how economic development could affect the saving behavior. Second, the study considers the cross-section dependency effect in the panel data analysis by applying the testing (second-generation panel unit-root and cointegration tests) and the estimation approaches (Augmented Mean Group, AMG estimator). The study demonstrates that the disregard of the cross-section dependency effect might generate lead to misleading results. Four determinants of savings are examined (GDP per capita, age dependency ratio on working group, inflation and government expenditure). Our results reveal the existence of cointegration and cross-section dependency in the saving relationship in both panel groups. By comparing the results across panel groups, it is observed that government expenditure contributes to lower saving in both groups of countries with larger impact in the Developed European countries. On the other hand, GDP contributes to higher saving in both groups of countries. Inflation also leads to higher saving in the Developed group rather than in the Developing group. Age dependency ratio is not influential in the Developed group, however, it might trigger lower saving in the Developing group