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.