16 government (CU, column 1), adjusted central government (CA, column 2), and unadjusted consolidated public sector (PU, column 3). 7° Performing this robustness check for alternative public-sector measures is important given that differences in empirical results across different studies have often been attributed to differences in public sector definition. Surprising to us, the estimated results are remarkably robust across definitions of the public sector. Concerning the adjusted and unadjusted data, this is not all that striking given that we have dropped from the sample the observations corresponding to extreme inflation episodes. In any case, Table 6 shows only one exception that deserves discussion.”° The estimated coefficient on public saving is larger in the central government regressions than in those corresponding to the consolidated public sector. In fact, the “offset” coefficient is about 25% larger in the case of the central government, so that in the long run it reaches 72% and 95% in the CU and CA specifications, respectively, in contrast with the 58% and 69% that results from the PU and PA estimates. The straightforward explanation of this result is that there is a larger degree of offset between the central government and other public-sector levels (provincial and state governments and public enterprises) than between the consolidated public sector and the private sector. This in turn implies that studies of Ricardian equivalence based on a central-government definition of the public sector tend to overstate the public-private saving offset. 4.5 Additional explanatory variables In Table 7, we add other potential private saving determinants, excluded from the “core” set of explanatory variables because they are either less commonly used in the literature or not well justified conceptually. We consider each variable in turn. The first one is the current account deficit (relative to private disposable income). While popular in the literature, the current account deficit is a somewhat dubious regressor, as it is jointly determined with saving in countries and/or at time periods characterized by unrestricted access to net foreign lending, and is exogenously determined otherwise. Thus, it is difficult to interpret the results obtained with this variable when using samples that combine observations on the two regimes (like ours and most others). In our case, we try to correct at least in part for these problems by treating the current account ratio as an endogenous variable in our GMM-IV procedure. The resulting estimates show that an increase in external saving (i.e., a worsening of the current account deficit) is partly offset by a decline of private saving; the offset coefficient is on the order of 33% in the short run, and about 60% in the long run. At face value, the implication is that an increase by, say, 2% of GNDI in the exogenous component of foreign lending reduces private saving by approximately 1.2% of GNDI in the long run. With the important caveat just noted, this agrees with the standard view that external saving acts as a substitute rather than as a complement to domestic private saving. The remaining coefficients show little change, although that on income growth becomes smaller in size.

_ The second variable is the ratio ofpublic investment to private disposable income. If public investment is perceived to be just like public consumption, its estimated coefficient would be of equal magnitude but opposite sign as that for the public saving ratio. If it is viewed as productive investment, its coefficient would be zero. What we obtain, however, is a Significantly negative coefficient. This suggests a somewhat puzzling complementarity