LAD (Least Absolute Deviations) estimates for each percentile and their confidence intervals respectively. At high savings rates, increases in income have a much lower effect on savings rates than at lower levels of income. This is the evidence of a diminishing marginal return (in terms of savings) of income increases in Armenian household data.

Similar results are found for ownership of land and real estate, condition of property, the sending of remittances, borrowing, number of household members, and education levels. The variation in these coefficients by savings rate demonstrates the homogeneity of a broad range of determinants, and suggests that naïve OLS fails to account for the distributional specific nature of these estimates. Ownership of land and real estate results in a higher savings rate, but this is particularly true at low savings levels. Given that households use this land for agriculture or other enterprise, it seems plausible that this might simply represent an income effect not entirely reflected in the _logY_ term which measures income at a single point in time. The condition of property variables are also significant at low savings rates, suggesting that investments in housing quality might be substituting for savings, with the effect stronger for the savings-restricted parts of the distribution. The sending of remittances, education levels, and number of household members all result in greater negative impacts on savings at low savings rates.

These results, along with those from Appendix 4 suggest a number of stylized facts in Armenian household saving behavior: the importance of income as a saving determinant, at both high and particularly low savings rates; the characteristics reflecting the volatility of future income streams such as education and household size resulting in a reduction in savings rate; and an age-gradient in savings with older generations more likely to save at higher rates than the young.

As is the case in the empirical literature on savings determinants, a shortcoming of this analysis is the potential endogeneity of the regressors specified in equation 1. Measurement error in these variables or correlation with omitted terms will bias estimates presented in Appendixes 4 and 5. Whilst this paper does not examine the existence of this potential endogeneity, some support of the conclusions may be drawn from Kulikov et al. (2007), who use an IV strategy on Estonian data and find no evidence of potential endogeneity of the income term. Due to current data limitations such an analysis is not employed. However the existence of more comprehensive household surveys, and particularly panel studies allowing for the control of fixed household effects could be employed usefully as an extension to this paper.

# **III. How to Stimulate These Determinants to Support Growth?**

The macroeconomic analysis of the determinants of Armenia aggregate savings rate allowed us to confirm that according to the literature the GDP per capita and its growth rate are the main determinants of the aggregate savings rate. We also pointed out the importance of the time deposit rate as one of the main determinants. Our analysis also figured out some nonintuitive determinants like the real exchange rate and the openness of the countries. We found that a depreciation of the REER (in our case a decrease in the level) leads to an increase in the savings rate. We also found that acceleration in the degree of openness has a positive impact on the savings rate.

Household savings behavior in Armenia has been examined using data from the ILCS 20042010. Results from standard linear regression models agree with the theory and past 15