Working Paper

Savings rates and output variability in industrial countries

Abstract: The economics literature offers competing hypotheses about the relationship between savings rates and output variability. This paper examines data for eight industrial countries to determine if there is a discernible pattern between savings rates and cyclical volatility of output. We find a striking coincidence of high gross savings rates and high output variability when real GDP gaps are estimated from a constant growth trend. But there is also strong evidence that this coincidence is an artifact. The major conclusion is that there is not a robust relationship between average gross savings rates and the variability of real GDP gaps (measured as deviations from trends) between 1960-Q1 and 1988-Q4. We also report a number of interesting features regarding estimated autoregressive processes for output in the major foreign industrial countries.

Keywords: Saving and investment; Business cycles;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 1989

Number: 363