The interest elasticity of savings in developing countries: The existing evidence

This paper presents a critical analysis of some of the most recent empirical work on the interest elasticity of savings in developing economies, supported by a set of empirical results. The paper argues that: (a) the real interest elasticity of savings is not easily detected using the existing empirical models, which generally yield insignificant interest rate parameters in the seventies; (b) the existing models suffer from serious defects that make if very difficult to interpret the estimated parameters.