Savings in Latin America after the mid 1990s: determinants, constraints and policies
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National savings and growth in Latin America have remained low in the 1990s and 2000s. The low level of national savings rates has forced Latin American countries to depend on foreign savings to finance investment and growth, which compounds the challenges for raising investment and growth prospects. This study extends the research on savings in three different dimensions: (1) in a time perspective, it extend the analysis on savings to the most recent years: we examine the period 1990-2003: (2) it examines the causality between savings, investment, and growth mostly uncovered in previous research on savings in Latin America; and (3) it examines the role of enterprises in the generation of national savings for several Latin American countries. We take a sample of nine Latin American countries. Our evidence showed that the main results found in the 1970s, 1980s and early 1990s regarding the factors associated with national savings also hold in the period 1990-2003. However, we found no evidence of association between national savings and the level of income (per capita GDP), dependency ratio, domestic interest rates, terms of trade, and income distribution. The relatively smaller size of our panel may explain the lack of correlation found in the cases of the income level and dependency ratio. The lack of correlation between national savings and the interest rates, terms of trade, and income distribution is in line with the ambiguous evidence found in the literature. Our evidence suggests a mutual causality between national savings and growth. Our results also suggest that households and the government appear to internalize the savings of enterprises. Further research aimed at compiling disaggregated series for the savings of households, enterprises, and the government would be required, however, to reach more definitive conclusions and policy implications.