Does Stock Market Development Affect the Savings Rate? An Econometric Analysis with Cross-Country Data

The present study extends the empirical analysis focusing on impact of stock market on savings rate of countries from the past literature, but using new instrumental variables for the regression analysis. The empirical analysis presented in the paper are carried out in two parts, taking the cross-section data for a sample of countries and then, separately, for 16 emerging market economies taking the data for the time period 1990-2012. In both the cases, the empirical findings suggest that stock market does not seem to have significant influence on the savings rate of the country. These results corroborate the finding of past researchers which concluded that a growing or deepening stock market need not be necessarily associated with higher savings rate of the country. Rather the influence on some of the economic variables, i.e., GDP growth rate or current account surplus have shown more significant impact on the countries' savings rate as per the statistical analysis presented in the paper