What Explains Increases in Korea's Saving Rates?

Abstract

This paper examines Korea's saving behavior and accounts for the determinants of Korea's saving rates that have risen remarkably since 1971. The empirical analysis using macroeconomic variables shows that high growth rates of disposable income and high real interest rates have contributed to increased savings. On the other hand, high inflation rates and government budget deficits have had negative effects on Korea's saving rates. All these empirical results indicate that tight government budgets and efforts to maintain inflation rates at low levels are necessary for the Korean economy to achieve rapid and stable growth through high levels of saving rates.[E21]