Public Savings Research Articles

Post-crisis growth in Serbia: Export, competitiveness and public expenditure containment

Sustainable post-crisis economic growth in Serbia should be driven by increase in net export and domestic savings. Econometric estimates of export, import and net export functions, presented in this paper point to decisive role of real exchange rate and GDP growth. Moreover it has been shown that, contrary to most other transition economies, Serbia has regained its foreign competitiveness as a consequence of sharp depreciation of dinar during the crisis. Second pillar of net export increase - the GDP growth should be driven by supply side structural reforms. Paper also demonstrates that increase in current public expenditure has negligible effect on economic activity, and advocates its relative decrease thus giving the space for increase in public savings and investment.

Potential of the system of rice intensification for systemic improvement in rice production and water use: the case of Andhra Pradesh, India

As opportunities to enhance the irrigation base for raising food production in the country are dwindling, India needs a more concerted effort to increase the efficiency and productivity of its irrigation systems. This study, based on an analysis of experience from the state of Andhra Pradesh, addresses the potential of the System of Rice Intensification (SRI) to contribute to systemic corrections in present paddy cultivation, both with regard to agronomic productivity and irrigation water use efficiency. This study points to the considerable increase in rice productivity and farmer incomes, which is being achieved in Andhra Pradesh with substantial reduction in irrigation water application, labor, and seed costs through utilization of SRI methods. Potential public savings on water and power costs could be drawn upon not only for promoting SRI but also to effect systemic corrections in the irrigation sector, to mutual advantage.

The Ageing, Longevity and Crowding Out Effects on Private and Public Savings

Life-cycle theory predicts ageing exerting long-term macroeconomic impacts through the reduction of private savings. However, empirical research studying macroeconomic determinants of savings generally regard age dependency as the sole measure of ageing, but overlook longevity, which can also give rise to population ageing but exerts an opposite impact on private savings. This paper addresses this potential bias by considering the joint effects age dependency and longevity have on savings. In contrast to the wider literature, not only private savings, but also public savings was studied. Applying dynamic panel models to a dataset of 55 countries over 1972-2004, age dependency was found to exert a negative effect on private savings. However, some of these reductions can potentially be offset by increased longevity. The study also revealed some level of crowding out of private savings by changes in public savings and finds that the Ricardian Equivalence Hypothesis cannot be entirely dismissed.

Future rent-seeking and current public savings

The conventional wisdom is that politicians' rent-seeking motives increase public debt and deficits. This is because myopic politicians face political risk and prefer to extract political rents as early as possible. In this paper we study the determination of government debt and deficits in a dynamic political economy model. We show that this conventional wisdom relies on economic volatility being low relative to political uncertainty. If economic volatility is high relative to political uncertainty, then a rent-seeking government actually over-saves and over-taxes along the equilibrium path relative to a benevolent government. This result emerges because of the option value of rent-seeking: a rent-seeking government over-values future funds because of the possibility of using them for future rents instead of cutting taxes in the event of a future boom (when marginal utility of private consumption is low). This over-saving bias is temporary since, in the long run, the rent-seeking government over-borrows relative to the benevolent government as it eventually squanders the funds it has accumulated. We find that both the under-saving and over-saving bias of the government can be solved by a rule of capping deficits.

Peripatetic intravenous service for metabolic bone disease: case study in patient centred-care for new NHS

Objective:To develop a ‘close to patient’ peripatetic intravenous service (PIVS) for delivery of specialist osteoporosis care in a community setting without increasing cost and with a reduced carbon footprint.Research design and methods:Cost and feasibility of a PIVS for intravenous (i.v.) bisphosphonate treatment were modelled using UK National Health Service costings and then tested in the field for 1 year. Average patient mileage to peripatetic sites was compared with mileage travelled if treated at the base hospital (current practice). The method of travel to hospital (current practice) or peripatetic sites (new study) was ascertained together with patients’ preference for the new or the current system. Peripatetic sites were researched and those with suitable facilities selected. Data for fuel consumption were based on a usage of 1 litre per 14.5 km.Main outcome measures:The main outcome measure was cost comparison between hospital and peripatetic services. Others included patient satisfaction, miles saved, method of travel to the clinic and changes in CO2 emissions.Results:Cost per patient, including drugs, lies between £557 and £622 annually for 1000 and 500 patients, respectively which is cost-neutral compared with hospital attendance. PIVS was rated more convenient by 98% of patients. Hospital transport was significantly reduced and the total monthly saving of 2000 miles has reduced CO2 emission by 6072 kg p.a. No medical emergency occurred in 410 infusions.Conclusions:PIVS is cost neutral compared with a conventional service, leads to a better patient experience, a significant cutback in hospital transport costs and a reduction of the NHS carbon footprint. However not all drugs may be suitable for this service: the area served was rural with large distances and poor public transport and mileage savings may not accrue in urban areas. Insurance was not included in the calculation of costs.

SAVINGS BEHAVIOR IN INDIA: CO-INTEGRATION AND CAUSALITY EVIDENCE

This study investigates the determinants of savings behavior in India and the direction of causality between savings and income per capita as these have important implications for development policy. We estimate long-run savings functions for India using modern co-integration procedures. Our empirical results show that higher income per capita and improved access to banking facilities significantly improves savings in India. On the other hand, foreign savings and public savings have negative impact on private and household savings. We also carry out an analysis of the direction of causality between savings and income. The results suggest that there is a one-way causation from income per capita to the savings rate.

Exploring illegal guarantees between group companies: a case from Turkey

PurposeThe purpose of this paper is to discuss that in an uncontrolled business environment public companies' resources may be abused to fund other group companies by their management.Design/methodology/approachThe paper has been designed on fraud theory. The theory has been developed on interviews with key management personnel, financial analysis, audit tests and gathering the facts on each step.FindingsThe paper concludes that in an uncontrolled financial market, owners, executives and statutory company auditors acting in harmony may break the financial rules, statutory obligations and convert a healthy public company into bankruptcy by means of milking its resources to other group companies on unfeasible projects or on individual pleasures.Practical implicationsAuditors both internal and external should pay attention to intragroup transactions. Companies, partially or wholly owned by the public might be under the influence of owner/executives. Here, it is not only the government interests as tax or social insurance, but also the shareholders' interests are at stake.Social implicationsResources are scarce, especially in developing countries. The public's savings must be sourced to feasible projects in trustworthy hands, otherwise public's trust is shaken which will deter potential shareholders to invest in capital markets, and consequently these negative repercussions will affect the whole community.Originality/valueThe case that the paper covers reflects the author's own audit experiences as an ex‐auditor. The names of the companies have been changed but not the essence of events. It is believed that the paper will shed light onto the path of the reader who might be an external or an internal or a statutory auditor or a manager of a company who might be involved in similar situations.

How does the US credit crisis affect the Asia–Pacific economies?—Analysis based on a general equilibrium model

The current financial crisis differs from most post-war recessions in that the balance sheets of both households and banks have been severely damaged, which could lead to structural changes in the behavior of households. Therefore, it may exert some far-reaching effects on regional economies in the short run as well as in the medium term. This paper studies these effects using a multi-country dynamic structural model. In the short run, the US credit crisis weighs heavily upon the Asia–Pacific economies through financial linkages in addition to the traditional trade channel due to the deepening global financial integration. The relative importance of various financial channels differs notably across economies. While stock market contagion is more important for advanced economies, flight to quality across borders plays a key role in less developed economies. From a medium-term perspective, changes in the US household behavior caused by the credit crisis can help correct global imbalances, but the effectiveness hinges largely upon how long US households can maintain a reasonably higher savings rate. In addition, although the declining American public savings rate may not exert material impacts on the global imbalances, it can darken regional growth prospects due to a potentially higher world real interest rate.

Le financement des investissements en Tunisie : le rôle des banques est-il important ?

The Financing of Investments in Tunisia : Is the Role of Banks Important ? Banks play an important role in economic development. They select companies that can benefit from public savings. The banking industry affects the path of economic growth through monetary creation and allocation of savings. Have Tunisian banks reached this stage of maturity to ensure a role for growth ? This is the question that the article tries to answer. We try to identify the role of banks in financing the economy. It examines the structure of the resources of non-financial firms and confirms the result of Chaari and Couppey-Soubeyran (2007). Indeed, the Tunisian financial system adopts a behavior still quite traditional and it is neither « Based Bank » or « Market Based ». Therefore, without financial reform considering a restructuring of banks in Tunisia, the Tunisian business financing will not change and will remain dominated by self-financing. Classification JEL : G2, G21, G32.

Micro Finance Initiatives (Models) in India: A Performance Appraisal

Finance is an essential ingredient of most of the economic activity for all households. The financial system serves to transfer financial resources from savers at home and abroad to borrowers. Though older institutions such as public sector banks and savings banks have participated in this process for a long time, the new institutions specialised in micro, small and medium-sized enterprises (MSMEs) finance have only begun to participate recently in the developing countries. Financial intermediation that provide vastly increased financial services for poor and low income people using domestically generated savings and recycling them within the economy is a virtuous circuit. It deserves to be a primary consideration in the context of inclusive development of financial sector. Broad based financial development means extending financial services to all segments of the population and the ability of financial service providers to access capital. J ust as financial intermediation between individual savers and borrowers benefits the accumulation of assets and investment, intermediation across the financial sector benefits the retail financial institutions broadly, including those that serve the poor and low income customers. Integrated into the domestic financial system, the micro finance institutions (MFIs) become players in the financial system, teaching the bankers how to bank with low income entrepreneurs, and helping shape financial sector policies to work for micro finance. Inclusion in financial markets takes place differently with regard to different types of institutions: whereas formal banks have access to financial markets and the inter-bank market, non-bank financial institutions with limited licence and semi-formal institutions have little or no access to funding. Thus, it is clear that linkages between market segments are weak in many countries and wide differences exist in risk adjusted returns. When financial intermediation does exist, it helps institutions to operate more efficiently and to better serve the target population.

MACROECONOMIA DO BRASIL PÓS-1994

The Brazilian macroeconomic model is characterized by financial opening, a growth strategy based on foreign savings, low (overvalued) exchange rate, current account deficits, high foreign debt, high basic (Selic) interest rate, low but inertial inflation, soft fiscal policy negative public savings, high public debt, depressed expected rates of profit, stagnant salary rate, depressed domestic savings, depressed investments, high unemployment, per capita GDP quasi-stagnant. The Brazilian economy achieved price but not macroeconomic stabilization in 1994 as long as intertemporal equilibrium was not achieved in fiscal and external accounts areas. Growth will only be resumed if monetary authorities acknowledge the interest rate and exchange rate trap in which the Brazilian economy is immersed, and decide to invert the perverse macroeconomic equation of high basic interest rate and low exchange rate. Yet, the international and domestic orthodoxy that runs macroeconomic policy in Brazil keeps using conventional macroeconomics to understand problems which are not conventional, and, so, it is unable to achieve the required macroeconomic stabilization.

Geographic and Demographic Bank Outreach: Evidence from Germany's Three-Pillar Banking System

Summary/Zusammenfassung Geographic and Demographic Bank Outreach: Evidence from Germany's Three-Pillar Banking System This paper investigates the performance of Germany's three-pillar banking system in providing financial services nationwide, regarding different outreach indicators. At the federal state level, bank outreach shows South-North and West-East gaps. Combining regional and bank data at the district level for 2005, we examine the determinants of geographic and demographic branch penetration of the regional savings and cooperative banks. Both banking groups provide a larger branch penetration in more wealthy regions, but maintain a larger number of branches per inhabitant in less densely populated regions, easing access to retail banking services. With their comparatively large branch penetration in less wealthy regions, public savings banks help to reduce regional economic disparities. The branch penetration of both banking groups increases with the share of elder people and bank size in a regio...

Savings and Lottery: An Historical Approach (Le Mariage Efficace De L'Épargne Et Du Jeu: Une Approche Historique)

This paper proposes an historical analysis of lottery linked financial assets. We show that these kind of assets are very famous and are able to raise a huge amount of money even when their expected return is relatively low. In some cases, they can be considered as a really cheap source of fund. In this study, we learn about these historical experiences while underlining how these lottery linked financial assets could be used to develop public savings.

Savings and Growth in Bangladesh

Savings and growth are often strongly correlated. Thus, it is important to study the determinants of savings and the direction of causality between savings and growth as these have important implications for development policy. Yet, careful empirical studies on savings behavior are missing for Bangladesh. Thus, in this paper, we estimate the long-run total and private savings functions for Bangladesh using recent time series techniques. We find that the total savings rate is mainly determined by the GDP growth rate, dependency ratio, interest rates and bank density. The private savings rate is also affected by the public savings rate. Further, using the Granger Causality tests, we find that in Bangladesh, there is a bi-directional causality between savings and growth. We also carry out the Forecast Error Variance Decomposition (FEVD) analysis using the VAR framework. The FEVD results confirm the causality results obtained using the Granger causality tests as well as the estimated savings functions.

Future Rent-Seeking and Current Public Savings

The conventional wisdom is that politicians' rent seeking motives increase public debt and deficit. This is because myopic politicians face political risk and prefer to extract political rents as early as possible. An implication of this argument is that governments will under-save during a boom, leaving the economy unprotected in the event of a downturn. This view motivates a number of fiscal rules which are aimed at cutting deficits and constraining borrowing so as to limit the size of this political distortion. In this paper we study the determination of government debt and deficits in a dynamic model of debt which characterizes political distortions. We find that in our model the conventional wisdom always applies in the long run, but only does so in the short run when economic volatility is low. Instead, when economic volatility is high, a rent-seeking government over-saves and over-taxes along the equilibrium path relative to a benevolent government. Paradoxically, the over-saving bias can also be solved in this case by a rule of capping deficits, although the mechanism operates through its effect on expectations of future rent extraction rather than though the contemporary constraint. However, these rules are ineffective in solving the high taxation problem caused by the political friction, which in the short run is more acute in the high income volatility scenario.

An Optimisation Model for Use of the Vi Polysaccharide Vaccine to Prevent Typhoid in Developing Countries

This article considers the investment case for using the Vi polysaccharide vaccine (Vi) in developing countries from two perspectives: reducing typhoid cases and limiting new health care spending. Consumer demand functions that predict probabilities of adults and children purchasing typhoid vaccinations at different prices are incorporated in a formal mathematical model. This optimisation model solves for the optimal vaccine prices to charge adults and children to maximise the number of typhoid cases avoided subject to the constraint that the sum of 1) vaccination revenues, 2) the public savings from avoided cases, and 3) an external (e.g., donor) contribution (if any), is sufficient to pay for the costs of the vaccination program. Using values from the recent literature for South and Southeast Asia for typhoid incidence, Vi vaccine effectiveness, public cost of illness, and vaccination program cost, three mass vaccination policy alternatives are considered - charging adults and children different (optimal) prices, charging uniform prices, and providing free vaccines. Assuming differential pricing is politically feasible, the vaccine price for children should be zero (because their incidence is much higher than adults), and fees for adults should cover most of costs of the vaccination program (because the savings from reduced public sector treatment are small). Equal prices for children and adults produce very similar results to the optimal solution. Alternatively, if vaccines are free, the number of cases is not significantly reduced compared to either pricing policy, but a large external financial contribution would be required.

The Social Security Surplus and Public Saving

The U.S. net national saving rate reached a postwar peak of 12.3 percent in 1965 and has since trended downward to 1.2 percent in 2007. Consequently, many analysts claim that saving is too low. Since 1983, the Social Security program has been in surplus, and the trust funds have been building up to pay for the retirement benefits for the baby boom cohort. Several recent studies have concluded that the increases in the trust funds have been more than offset by reductions in surpluses elsewhere in the federal budget. These studies therefore conclude that public saving has fallen as a result of the trust fund buildup since the mid-1980s. This study reexamines this issue. In the results, the authors cannot find evidence that the trust fund surpluses have had an impact on the rest of the federal budget.

The public returns to public educational investments in African-American males

This paper calculates the public savings (financial benefits) from greater public investments in the education of African-American males. Over one-fifth of each age cohort of black males in US is not a high school graduate. We identify five interventions that would—based on credible research—increase the graduation rate; we also report the public cost of each intervention. We then calculate the lifetime public benefits in terms of increased tax revenues and lower spending on health and crime. In present values, for a black male aged 20, these public benefits amount to $256,700 per new graduate and the median intervention would cost only $90,700. The benefit/cost ratio is 2.83. Simply equating the high school graduation rate of black males with that of white males would yield public savings of $3.98 billion for each age cohort. These results suggest that increased investments in education for black males at risk of dropping out of high school should be an economic priority.

Current Account Deficits in Africa: Stylized Facts and Basic Determinants

This article analyzes the behavior of current account deficits in Africa. The findings are that deficits are (i) not very persistent; (ii) positively linked with domestic growth; (iii) strongly linked with public (and private) savings, suggesting that fiscal consolidation in IMF‐supported programs may be relatively effective; (iv) linked with aid flows, so as to close the external gap; and (v) linked with currency depreciation and the terms of trade.

Monetary and Fiscal Policies

Though the Pakistani economy had recently achieved some level of macroeconomic stability, at present there are fears that this stability could be threatened. This paper looks at monetary and fiscal reforms over the last decade and focuses on the areas that need to be addressed on both fronts. In particular, the paper looks at how present monetary policy needs greater clarity and how fiscal policy needs to focus on raising public savings and diversifying the sources of borrowing.