4 were amployed, e.g., the trade balance and current government expenditure. In particular, the cu.rent government expenditure measure from national accounts tsnds to be larger than the fiscal accounts measure because the latter computes purchases of military equipment as investment whereas the former doesn't. Further consistency problems arise because the fiscal accounts measure of public investmant are used as fiscal accounts treats purchases of assets as investment whereas national accounts properly considers these purchases below the line of financing.

A useful feature of our study is that it provides information about private saving components. Is consumption more important than disposable income to explain changes in private saving? And what components of consumption/disposable income matter most? If, for example, the bulk of consumption growth is accounted for by durable consumption in the wake of trade liberalization, the measured decline in private saving need not be cause for concern as it would be a once-and-for-all stock-adjustment in durable goods. On the other hand, if the main factor behind the recent decline in private saving is disposable income (rather than consumption) it is useful to identify which component of disposable income accounts for the decline. If, for example, the decline in disposable income stems from a reduction in the domestic public debt service, there may be less cause for concern than if it stems from non-interest income.

# Several conclusions can be extracted from revised measurements.

(i) Due to the inflation-adjustment of domestic and foreign interest income and the inclusion of the inflation tax in our measure the conventional private saving measure is systematically higher than the one proposed. The patterns of private saving suggested by the two measures is also qualitatively different. In particular, the recent decline in private saving appears relatively less important than conventional measures of private saving suggest.

(ii) Most of the variability of private saving over the 1980-90 period is ascribable to fluctuations of disposable income, i.e., disposable income fluctuated considerably more than private consumption. In turn, most of the Ziuctuation of disposable income represents transfers between public and private sectors which account for much of the complementarity observed between public and private saving rates. Public saving performance was strongly influenced by external ee%"nts such as the 1981-82 debt crisis and the 1985-86 oil crisis.

(iii) In particulax. the sharp drop in private saving observed in 1990 was prompted primarily by the decline in disposable income and, to a lesser extent, by fast growing consumption. The decline in disposable income was explained by a sharp drop in the real domestic public debt service and, to a lesser degree, by a reduction in real income from foreign assets (which, in turn, stemmed from lower external interest rates and real peso appreciation). However, the 1990 drop in public debt service was preceded by a bigger increase in 1988-89 so that disposable income (and private saving) in 1990 was still substantially above the 1987 level. Another important factor behind the upward trend in disposable income prior to 1990 was the sharp drop in the inflation tax.

(iv) Only one-quarter of the increase in consumption in 1988-90 was due to the increase in durable consumption which, nevertheless, grew almost three times faster than the other consumption items. The reason is that durable consumption represents a small share of total consumption; about 11%.

(v) Fluctuations in the real exchange rate played an important role in the evolution of public saving, by influencing the real interest service on foreign debt, and of private saving, by influencing income from foreign