Should Latin America Save More to Grow Faster?
Latin America’s historically low saving rates and sub-par growth performance raise the question of whether the region should save more to grow faster. Economists generally resist acknowledging a policy-exploitable causal connection going from savin...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/08/24879192/latin-america-save-more-grow-faster http://hdl.handle.net/10986/22444 |
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okr-10986-224442021-06-14T10:22:16Z Should Latin America Save More to Grow Faster? de la Torre, Augusto Ize, Alain CURRENCY MISMATCHES GROWTH RATES PUBLIC SAVINGS MONETARY POLICY DEPOSIT CAPITAL MARKETS FINANCIAL SERVICES EXTERNAL COMPETITIVENESS FOREIGN CAPITAL FOREIGN DEBT INSTITUTIONAL ENVIRONMENT CAPITAL ACCUMULATION SKILLED WORKERS DISPOSABLE INCOME INCOME INTEREST RATE OF RETURN DEBT CRISIS LONG-TERM FINANCE MARGINAL COST INTEREST RATE RATE OF RETURN ON CAPITAL EXCHANGE STOCK MARKET INCOME GROUP MACROECONOMIC POLICY LIQUIDITY DEVELOPING COUNTRIES POLITICAL ECONOMY BINDING CONSTRAINT INFLATION CRISIS FISCAL POLICY WORLD DEVELOPMENT INDICATORS RISK PREMIUM OUTPUT RATIO FACTORS OF PRODUCTION SUBSIDY PRICE TAX SAVING CURRENT ACCOUNT SURPLUSES SAFETY NETS MARKET BEHAVIOR CENTRAL BANK EXTERNAL FINANCE PRIVATE SAVING INSTITUTIONAL INVESTOR SAVINGS CURRENCY REGIME CHANGES LIBERALIZATIONS LOW-INCOME COUNTRIES DOMESTIC CAPITAL INVESTOR BEHAVIOR EXCHANGE RATES OUTPUT GAPS INTEREST RATES GLOBALIZATION CAPITAL OUTFLOWS DEBT CAPITAL MARKET INFLATION CRISES FINANCIAL CRISES FOREIGN ASSETS GOVERNANCE INDICATORS OPEN ECONOMY SOCIAL PROTECTION MIDDLE-INCOME COUNTRIES DIVIDENDS NATURAL RESOURCES GROSS DOMESTIC PRODUCT INSURANCE POLICY FOREIGN CURRENCY POWER PARITY TAXES EQUITY SOVEREIGN DEBT SOCIAL SAFETY NETS HUMAN CAPITAL CAPITAL CONTROLS CAPITAL RATIO CREDIT CONSTRAINTS VOLATILITY COUNTRY RISK FINANCIAL STABILITY FINANCIAL CRISIS FOREIGN FINANCING FUTURE DEBT CRISES PENSIONS OUTPUT RATIOS PURCHASING POWER FOREIGN INVESTMENT AGGREGATE DEMAND DIVIDEND INCOMES CAPITAL FLOWS SHARES EQUILIBRIUM VALUES CREDIT RATING MIDDLE- INCOME COUNTRIES OUTPUT CAPITAL INFLOW CLOSED ECONOMY GOVERNANCE INFLATION RATES EXPOSURE INSURANCE ECONOMIC DEVELOPMENT TRADE INVESTOR GROWTH ●INVESTMENT MARKET VOLATILITY PUBLIC SAVING GROWTH RATE INVESTMENT NATURAL RESOURCE SHARE BALANCE SHEETS COLLATERAL TRADES RATE OF GROWTH CAPITAL INFLOWS LONG- TERM FINANCE EXCHANGE RATE COMMODITY PRICES FINANCIAL SECTOR CAPITAL FLIGHT COMMODITY CAPITAL ACCOUNT INTERNATIONAL RESERVE INFLATION EPISODES PRICES EXCHANGE RATE REGIMES COST OF CAPITAL COMPETITION CROSS-BORDER CAPITAL Latin America’s historically low saving rates and sub-par growth performance raise the question of whether the region should save more to grow faster. Economists generally resist acknowledging a policy-exploitable causal connection going from saving to growth because domestic saving is perceived to be fully endogenous, optimally determined, or fully substitutable by foreign saving. However, to the extent that these three assumptions do not hold, three channels can be established through which higher domestic saving—by curbing persistent current account deficits—can promote medium-term growth. The channels are first, a real interest rate channel, whereby higher saving reduces the cost of capital and enhances macro sustainability; second, a real exchange rate channel, through which higher saving leads to a more competitive real exchange rate; and third, an endogenous saving channel, whereby saving follows growth and, hence, subsequently compounds the effect of the first two channels. Econometric evidence supports all three channels and suggests that the lower-saving countries in Latin America and the Caribbean, especially those with recurrently weak balance of payments and persistent domestic demand pressures on the non-tradable sector, would benefit the most from boosting their saving rates. 2015-08-17T18:42:07Z 2015-08-17T18:42:07Z 2015-08 Working Paper http://documents.worldbank.org/curated/en/2015/08/24879192/latin-america-save-more-grow-faster http://hdl.handle.net/10986/22444 English en_US Policy Research Working Paper;No. 7386 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
CURRENCY MISMATCHES GROWTH RATES PUBLIC SAVINGS MONETARY POLICY DEPOSIT CAPITAL MARKETS FINANCIAL SERVICES EXTERNAL COMPETITIVENESS FOREIGN CAPITAL FOREIGN DEBT INSTITUTIONAL ENVIRONMENT CAPITAL ACCUMULATION SKILLED WORKERS DISPOSABLE INCOME INCOME INTEREST RATE OF RETURN DEBT CRISIS LONG-TERM FINANCE MARGINAL COST INTEREST RATE RATE OF RETURN ON CAPITAL EXCHANGE STOCK MARKET INCOME GROUP MACROECONOMIC POLICY LIQUIDITY DEVELOPING COUNTRIES POLITICAL ECONOMY BINDING CONSTRAINT INFLATION CRISIS FISCAL POLICY WORLD DEVELOPMENT INDICATORS RISK PREMIUM OUTPUT RATIO FACTORS OF PRODUCTION SUBSIDY PRICE TAX SAVING CURRENT ACCOUNT SURPLUSES SAFETY NETS MARKET BEHAVIOR CENTRAL BANK EXTERNAL FINANCE PRIVATE SAVING INSTITUTIONAL INVESTOR SAVINGS CURRENCY REGIME CHANGES LIBERALIZATIONS LOW-INCOME COUNTRIES DOMESTIC CAPITAL INVESTOR BEHAVIOR EXCHANGE RATES OUTPUT GAPS INTEREST RATES GLOBALIZATION CAPITAL OUTFLOWS DEBT CAPITAL MARKET INFLATION CRISES FINANCIAL CRISES FOREIGN ASSETS GOVERNANCE INDICATORS OPEN ECONOMY SOCIAL PROTECTION MIDDLE-INCOME COUNTRIES DIVIDENDS NATURAL RESOURCES GROSS DOMESTIC PRODUCT INSURANCE POLICY FOREIGN CURRENCY POWER PARITY TAXES EQUITY SOVEREIGN DEBT SOCIAL SAFETY NETS HUMAN CAPITAL CAPITAL CONTROLS CAPITAL RATIO CREDIT CONSTRAINTS VOLATILITY COUNTRY RISK FINANCIAL STABILITY FINANCIAL CRISIS FOREIGN FINANCING FUTURE DEBT CRISES PENSIONS OUTPUT RATIOS PURCHASING POWER FOREIGN INVESTMENT AGGREGATE DEMAND DIVIDEND INCOMES CAPITAL FLOWS SHARES EQUILIBRIUM VALUES CREDIT RATING MIDDLE- INCOME COUNTRIES OUTPUT CAPITAL INFLOW CLOSED ECONOMY GOVERNANCE INFLATION RATES EXPOSURE INSURANCE ECONOMIC DEVELOPMENT TRADE INVESTOR GROWTH ●INVESTMENT MARKET VOLATILITY PUBLIC SAVING GROWTH RATE INVESTMENT NATURAL RESOURCE SHARE BALANCE SHEETS COLLATERAL TRADES RATE OF GROWTH CAPITAL INFLOWS LONG- TERM FINANCE EXCHANGE RATE COMMODITY PRICES FINANCIAL SECTOR CAPITAL FLIGHT COMMODITY CAPITAL ACCOUNT INTERNATIONAL RESERVE INFLATION EPISODES PRICES EXCHANGE RATE REGIMES COST OF CAPITAL COMPETITION CROSS-BORDER CAPITAL |
| spellingShingle |
CURRENCY MISMATCHES GROWTH RATES PUBLIC SAVINGS MONETARY POLICY DEPOSIT CAPITAL MARKETS FINANCIAL SERVICES EXTERNAL COMPETITIVENESS FOREIGN CAPITAL FOREIGN DEBT INSTITUTIONAL ENVIRONMENT CAPITAL ACCUMULATION SKILLED WORKERS DISPOSABLE INCOME INCOME INTEREST RATE OF RETURN DEBT CRISIS LONG-TERM FINANCE MARGINAL COST INTEREST RATE RATE OF RETURN ON CAPITAL EXCHANGE STOCK MARKET INCOME GROUP MACROECONOMIC POLICY LIQUIDITY DEVELOPING COUNTRIES POLITICAL ECONOMY BINDING CONSTRAINT INFLATION CRISIS FISCAL POLICY WORLD DEVELOPMENT INDICATORS RISK PREMIUM OUTPUT RATIO FACTORS OF PRODUCTION SUBSIDY PRICE TAX SAVING CURRENT ACCOUNT SURPLUSES SAFETY NETS MARKET BEHAVIOR CENTRAL BANK EXTERNAL FINANCE PRIVATE SAVING INSTITUTIONAL INVESTOR SAVINGS CURRENCY REGIME CHANGES LIBERALIZATIONS LOW-INCOME COUNTRIES DOMESTIC CAPITAL INVESTOR BEHAVIOR EXCHANGE RATES OUTPUT GAPS INTEREST RATES GLOBALIZATION CAPITAL OUTFLOWS DEBT CAPITAL MARKET INFLATION CRISES FINANCIAL CRISES FOREIGN ASSETS GOVERNANCE INDICATORS OPEN ECONOMY SOCIAL PROTECTION MIDDLE-INCOME COUNTRIES DIVIDENDS NATURAL RESOURCES GROSS DOMESTIC PRODUCT INSURANCE POLICY FOREIGN CURRENCY POWER PARITY TAXES EQUITY SOVEREIGN DEBT SOCIAL SAFETY NETS HUMAN CAPITAL CAPITAL CONTROLS CAPITAL RATIO CREDIT CONSTRAINTS VOLATILITY COUNTRY RISK FINANCIAL STABILITY FINANCIAL CRISIS FOREIGN FINANCING FUTURE DEBT CRISES PENSIONS OUTPUT RATIOS PURCHASING POWER FOREIGN INVESTMENT AGGREGATE DEMAND DIVIDEND INCOMES CAPITAL FLOWS SHARES EQUILIBRIUM VALUES CREDIT RATING MIDDLE- INCOME COUNTRIES OUTPUT CAPITAL INFLOW CLOSED ECONOMY GOVERNANCE INFLATION RATES EXPOSURE INSURANCE ECONOMIC DEVELOPMENT TRADE INVESTOR GROWTH ●INVESTMENT MARKET VOLATILITY PUBLIC SAVING GROWTH RATE INVESTMENT NATURAL RESOURCE SHARE BALANCE SHEETS COLLATERAL TRADES RATE OF GROWTH CAPITAL INFLOWS LONG- TERM FINANCE EXCHANGE RATE COMMODITY PRICES FINANCIAL SECTOR CAPITAL FLIGHT COMMODITY CAPITAL ACCOUNT INTERNATIONAL RESERVE INFLATION EPISODES PRICES EXCHANGE RATE REGIMES COST OF CAPITAL COMPETITION CROSS-BORDER CAPITAL de la Torre, Augusto Ize, Alain Should Latin America Save More to Grow Faster? |
| relation |
Policy Research Working Paper;No. 7386 |
| description |
Latin America’s historically low saving
rates and sub-par growth performance raise the question of
whether the region should save more to grow faster.
Economists generally resist acknowledging a
policy-exploitable causal connection going from saving to
growth because domestic saving is perceived to be fully
endogenous, optimally determined, or fully substitutable by
foreign saving. However, to the extent that these three
assumptions do not hold, three channels can be established
through which higher domestic saving—by curbing persistent
current account deficits—can promote medium-term growth. The
channels are first, a real interest rate channel, whereby
higher saving reduces the cost of capital and enhances macro
sustainability; second, a real exchange rate channel,
through which higher saving leads to a more competitive real
exchange rate; and third, an endogenous saving channel,
whereby saving follows growth and, hence, subsequently
compounds the effect of the first two channels. Econometric
evidence supports all three channels and suggests that the
lower-saving countries in Latin America and the Caribbean,
especially those with recurrently weak balance of payments
and persistent domestic demand pressures on the non-tradable
sector, would benefit the most from boosting their saving rates. |
| format |
Working Paper |
| author |
de la Torre, Augusto Ize, Alain |
| author_facet |
de la Torre, Augusto Ize, Alain |
| author_sort |
de la Torre, Augusto |
| title |
Should Latin America Save More to Grow Faster? |
| title_short |
Should Latin America Save More to Grow Faster? |
| title_full |
Should Latin America Save More to Grow Faster? |
| title_fullStr |
Should Latin America Save More to Grow Faster? |
| title_full_unstemmed |
Should Latin America Save More to Grow Faster? |
| title_sort |
should latin america save more to grow faster? |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://documents.worldbank.org/curated/en/2015/08/24879192/latin-america-save-more-grow-faster http://hdl.handle.net/10986/22444 |
| _version_ |
1764451099603894272 |