The Effect of Net Foreign Assets on Saving Rate
Journal Title: Journal of Empirical Economics - Year 2014, Vol 3, Issue 3
Abstract
Observing empirical data we find that many countries try to delay the decision of increasing saving rate in order to avoid a decrease of the living standards. However the delay leads a deterioration of countries financial stability.We present a simple theoretical model that connects between countries' saving rate and their net foreign assets. Using cross section data set of 135 countries in 2010 we estimated the econometric relation between saving rate in 2010 as dependent variable and two explanatory variables: the current account in 2010 and the aggregated current account during 1980-2010. Our findings show that industrial countries in a bad financial state tend to decrease their saving rate as external debt is larger causing to deterioration in external debt while countries with good financial state tend to increase their saving rate and the tendency increase as financial state becomes better. Only in countries with a very large external debt saving rate tends to grow. The results point that gross foreign debt will keep increasing and will worsen world financial state causing increased risk of getting into a world crisis.
Authors and Affiliations
Nissim Ben David, Zvi Winer
Keywords
Related Articles
- EP ID EP27366
- DOI -
- Views 308
- Downloads 10
Demographic Features of the Nigerian Household: Does It Matter For Poverty?
This paper examined the relationship between selected demographic characteristics of the household and poverty indicators across twelve states in the six geo - politics zones of Nigeria with a view to determining the e...
Analysis of Russia’s Bilateral Trade and Economic Cooperation with SCO country Members: Gravity Model Approach
SCO (Shanghai Cooperation Organization) plays an important role in the economic spheres of influence in Central Asia, and also serves as an effective instrument of regional economic integration. International trade int...
An Assessment of the Effect of Telecommunication Investment on Economic Growth in West Africa
The study is an empirical assessment of the effect of telecommunication investment on economic growth in West Africa covering the period 2001-2013, and using panel data from various secondary sources. The generalized m...
What Kind of Education is good For US Productivity? Community Colleges versus Universities
Community college education has been considered the most important mode of education in developing countries. In the US however, community colleges take a back seat in comparison to four-year colleges. Although more at...
The Impact of the International Financial Crisis on the Stock Market Return: The Case of Tunisian Stock Exchange
The subprime crisis that has ravaged most economies has led to a slowdown in the productive tool and a sharp decline in GDP, as well as high fiscal costs; they disrupt the functioning of financial intermediaries and a p...