Taher’s (2001) study explores the determinants of private savings in Saudi Arabia. His findings assert that government spending on investment has a positive effect on private saving; alternatively, budget surplus, excess of consumer loans, and outgoing remittances observed a negative effect.

Burnside (2000) analyzes the behavior of private savings in Mexico by using quarterly data from 1980 to 1995. The correlation of private savings with various macroeconomic time series data suggests that private savings is negatively correlated with the fiscal balance of the government. In addition, private savings is more highly correlated with the level of private disposable income (which has significant cyclical components) than it is with GNP. This suggests that savings, rather than consumption, absorbs transitory movements in income. The paper uses vector autoregressions in which tax shocks are found to be the primary determinants of the ratio of private savings to GDP.

Rymes (1993) examines the fundamental determinants of savings and bubbles in stocks, bonds, and real estate prices by exploring key findings drawn from the works of Laurence Kotlikoff and Robert Shiller. Kotlikoff attributes savings to the existence of the extended family as well as intergenerational transfers; he attests that savings is determined by the individual based on their “fundamentals” (tastes, technology, endowments) as well as their intertemporal maximizing choices. In addition, he claims that the role of the government is overemphasized in the determination of rates and accumulation. Alternatively, Shiller examines the prices of stocks, bonds, and residential real estate, hypothesizing that stock markets are efficient and that no such excessive volatility exists in prices. Moreover, he argues that asset prices reflect more than fundamentals, attesting that they reflect bubbles as well. Rymes concludes that although both studies are detrimental to savings literature, he deems that the necessity to draw a line of separation between fundamentals and conventions is wrong.

The main takeaway from surveying recent literature is that the findings are consistent with the classical theory; that is, growth in income per capita has a predictive power to savings behavior that is in line with the Keynesian proposition. However, it should be noted that determinants of private savings behavior differ across countries, which merit individual country analysis to robustly model savings behavior and identify its key determinants; this is a key motivation to the deliberation of this paper.

# **ii) Recent Contributions for Understanding Savings Behavior in Egypt**

Hevia and Loayza (2012) illustrate the mechanisms that link national savings and economic growth in Egypt. The study uses a simple theoretical model calibrated to fit the Egyptian economy and simulated to explore different potential scenarios. Their main conclusion was that if the Egyptian economy did not experience progress in productivity, then a high rate of economic growth would not be feasible at current rates of national saving and would require a saving effort that is highly unrealistic. To obtain a constant 4% growth rate of GDP per capita with no TFP improvement would require a national saving rate of around 50% in the first decade and 80% in 25 years. However, if productivity starts to rise to at least moderate levels, sustaining and improving high rates of economic growth becomes viable. Realistically, to achieve the goal of high economic growth, the national savings effort must be alleviated by forcefully and purposefully improving productivity.

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