Why Aren't Savings Rates in Latin America Procyclical?
NBER Working Paper No. 6502
We document a striking empirical regularity: Latin American savings rates are as a rule substantially less procyclical than for OECD countries and in some cases are actually countercyclical. We build a non-representative agent intertemporal macroeconomic model that rationalizes this phenomenon as the equilibrium outcome of interaction between multiple groups that have common access to aggregate income. We conclude by suggesting that institutional reform may hold the key to improving the cyclical behavior of savings in Latin America.
Published: Journal of Development Economics, Vol. 57, no. 1 (October 1998): 185-199.