DRIVERS OF PRIVATE SAVING IN SUB-SAHARAN AFRICAN COUNTRIES

Abstract

We utilize both the first-difference and the System GMM to estimate a dynamic private saving function for 39 Sub-Saharan African Countries. Parsimonious results show that the private saving rate is persistent; urbanization ratio, youth dependency ratio, elder dependency ratio, per capita income growth, terms of trade growth, public saving rate, general government consumption, real interest rate, credit to private sector, inflation and current account deficit exert a significant influence on the private saving rate. Apart from showing that the economic policy framework should take into account the persistent nature of the private saving rate, there are other policy insights from the estimation of the private saving model. There is especially the need to pursue growth-enhancing policies, to broaden the tax base, to implement trade-enhancing polices, to improve the functioning of the financial system and to design polices for prudent management of domestic resources in order to reduce current account deficits.