Estimating private savings behaviour in Greece

This paper investigates the long- and short-run determinants of aggregate private savings in Greece employing data over the period 1961-2000. The long-run savings function is estimated based on an extended life-cycle hypothesis taking into account the economic and demographic developments during this period. A long-run saving function sensitive to fertility changes, old dependency ratio, real interest rate, liquidity and public finances is found to exist and the importance of short-run deviations is presented using vector error-correction model estimation. The empirical evidence suggests the existence of a stable long-run savings function in Greece both in the long- and short-run periods and the policy implications of such a relationship are presented.