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Saving, Growth, and Liquidity Constraints

Tullio Jappelli and Marco Pagano
The Quarterly Journal of Economics
Vol. 109, No. 1 (Feb., 1994), pp. 83-109
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2118429
Page Count: 27
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Saving, Growth, and Liquidity Constraints
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Abstract

In the context of an overlapping-generations model, we show that liquidity constraints on households (i) raise the saving rate, (ii) strengthen the effect of growth on saving, (iii) increase the growth rate if productivity growth is endogenous, and (iv) may increase welfare. The first three positions are supported by cross-country regressions of saving and growth rates on indicators of liquidity contraints on households. The results suggest that financial deregulation in the 1980s has contributed to the decline in national saving and growth rates in the OECD countries.

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