3 instruments to correct for these problems. This permits us to make some progress towards drawing inferences on the effects of policy and non-policy variables on private saving rates, rather than merely describing their association.

The paper is organized as follows. Section 2 summarizes briefly recent crosscountry empirical studies of private saving. Section 3 presents our empirical strategy, describing the data set and estimation approach. Section 4 reports the econometric results for the private (and national) saving rate using a variety of samples, regression specifications, and estimation techniques. The paper closes with brief concluding remarks.

# 2. Determinants of Private Saving Rates in Previous Panel Studies

Table 1 summarizes potential determinants of private saving rates and lists their expected signs according to consumption theory.? A number of recent empirical studies have estimated the effect of various economic and demographic variables on private saving rates in cross-country time-series (panel) samples. In order to provide a summary on the empirical evidence related to each of the saving determinants under consideration, the last column in Table I lists the qualitative results of 6 recent studies using large panel data samples. They comprise studies for both industrial and developing countries (Masson, Bayoumi, and Samiei 1995; Edwards 1996; and Bailliu and Reisen 1998), for industrialcountry samples (Haque, Pesaran, and Sharma 1999), and for developing-country samples (Corbo and Schmidt-Hebbel 1991; and Dayal-Ghulati and Thimann 1997).

The common feature of these papers is that they are based on reduced-form saving equations, not necessarily derived from first principles. * They differ widely in other dimensions, as they are based on different sample periods and countries as well as on different model specifications and estimation techniques. Not surprisingly, only a few saving determinants appear to be consistently significant across different studies and with their estimated signs according to theory. They include the terms of trade, domestic and foreign borrowing constraints, fiscal policy variables, and pension system variables. Regarding other determinants for which consumption theories either differ regarding their signs or point toward ambiguous signs, as in the case of income growth and interest rates, these empirical studies differ widely. They also differ in reported significance levels of variables for which theories tend to agree on expected signs, such as income level, inflation, and demographic dependency ratios.

# 3. Empirical strategy

The above empirical studies capture a number of factors relevant to saving decisions, but vary considerably in terms of data coverage and quality, empirical specification and econometric procedure. Our primary objective here is to extend this literature by providing a comprehensive characterization of the empirical association between private saving rates and a broad range of potentially important saving determinants using the best available data. To do this, we complement and extend previous work along three dimensions. First, we use the largest set of consistent macroeconomic data on saving assembled to date. Second, we adopt a reduced-form approach encompassing a variety of saving determinants identified in the literature — rather than adhere to one particular narrow structural model. Third, we employ a variety of estimation methods, but focus our attention