Abstract
This paper presents a sectoral accounting approach to the determination of the national savings ratio. Starting with the process of sectoral savings determination and showing the sectoral interactions, this approach offers an acceptable empirical framework for aggregate savings studies. The model, estimated with the Korean data, is used to run simulations to evaluate its predictive capacity, to decompose past savings performance by major factors and to assess the savings effect of policy changes and other exogenous shocks. The results indicate that income variables have been the most important determinants, although interest rate and tax policies have also played some role.
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