Private saving determinants in European countries: A panel cointegration approach

This paper investigates the determinants of aggregate private saving in European countries employing panel data. The long-run saving function is estimated based on an extended lifecycle hypothesis taking into account the economic and demographic developments during this period. A long-run saving function sensitive to dependency ratio, old dependency ratio, liquidity, public finances, real disposable income growth, real interest rate and inflation is found to exist. The empirical evidence suggests the existence of a long-run saving function in Europe. The policy implications of such a relationship are presented.