Savings, Financial Development, and Economic Growth in the Arab Republic of Egypt Revisited
Private savings play a pivotal role in financing development and sustaining growth. Recently, there have been many theoretical developments that underpin key determinants of savings behavior, many of which merit empirical investigation. Understandi...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/562261491240790010/Savings-financial-development-and-economic-growth-in-the-Arab-Republic-of-Egypt-revisited http://hdl.handle.net/10986/26365 |
| Summary: | Private savings play a pivotal role in
financing development and sustaining growth. Recently, there
have been many theoretical developments that underpin key
determinants of savings behavior, many of which merit
empirical investigation. Understanding the dynamics of the
determinants of savings is crucial to inform economic policy
and devise reform programs. This paper builds on earlier
work examining the stability of the long-run relationship
between the real interest rate, financial saving, and total
saving during 1960 to 1990. The paper extends the scope of
the empirical investigation of the determinants of private
savings behavior in the Arab Republic of Egypt, and
considers the effect of financial development. The analysis
uses quarterly data covering 1991–2010, adopting a vector
error correction model. The key findings attest that private
savings in Egypt follow the Life Cycle Model in the long
term. Controlling for population growth, the analysis finds
that the real interest rate and financial development are
key determinates for real private savings in the long run.
The negative long-run relation between the real interest
rate and private savings holds under the proposed model
structure as well as for that in the earlier work. However,
in the short run, inflation and exchange rate movements are
key determinants for private savings decisions. Robust
economic policies, inclusive of macroeconomic and monetary
measures, are prerequisites for maximizing private savings
and financing growth in Egypt. |
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