DP662 Saving, Growth and Liquidity Constraints

Author(s): Tullio Jappelli, Marco Pagano
Publication Date: May 1992
Keyword(s): Growth, Liquidity Constraints, Saving
JEL(s): E21, E44, O16, O67
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=662

In the context of an overlapping generations model, we show that liquidity constraints on households: (i) raise the saving rate; (ii) strengthen the effect of growth on saving; and (iii) increase the growth rate if productivity growth is endogenous. These propositions are supported by cross-country regressions of saving and growth rates on indicators of liquidity constraints on households. The results suggest that financial deregulation in the 1980s has contributed to the decline in national saving rates in the OECD countries and that the process of financial integration in the European Community may lead to a further reduction in saving and growth rates.