Private, Public and Foreign Savings

CHAPTER 1:Saving, Investment, Financial Integration and FDI in Central Europe (Magorzata Jakubiak) Evidence on domestic savings and investments in industrialised countries indicates that capital markets are not perfectly integrated. On the contrary, various measures of financial integration prove that capital has become highly mobile. This paper presents theoretical explanations for this fact, data on the European Union "Northern" and "Southern" states and estimations of the saving-investment relation for some emerging Central and Eastern European countries (CEECs). It was found that domestic investments in Poland, Hungary, Estonia, and the Czech Republic have been partly financed by FDI inflows in recent years. A similar situation was taking place in the so-called "Southern" Europe in the 1980s. There has been a geographical shift in FDI inflows from Southern EU countries to more developed CEECs in the mid-1990s. It seems possible that fast growing FDI inflows in Poland and in Estonia could hamper the future growth of saving rate. CHEPATER 2: The Interactions between Private Savings and Governments Budget Deficits (Joanna Siwinska) This paper attempts to assess the influence of government budget deficit on private saving rate, with special emphasis on Poland and other transition economies. The theoretical predictions concerning the direct impact of budget actions on private savings are given by the Ricardian-Barro Equivalence Theorem and the Neo-classical view. Existing empirical research on the correctness of the Ricardian versus the Classical view is largely inconclusive. A simple empirical analysis for Poland indicates, that in years 1991.1997 there was no strong Ricardian-type relationship between the government net lending and private savings. There is however a possibility of the existence of a weak form of Ricardian Equivalence in Poland, when one assumes, that the social security is treated differently than the rest of government net lending, and therefore social security balance is excluded form government budget balance. However, much longer time series is needed to draw any strong conclusions. CHAPTER 3: Influence of Interest Rates on Credits and Deposits of Non-financial Sector in Poland (Pawe3 Kaczorowski, Tomasz Tokarski) The main purpose of this paper is to analyse factors that influence the magnitude ofcredits and deposits held by households and enterprises. The analysis is performed for the period 1994.1998 using quarterly time-series data. The magnitude of credits and deposits was initially supposed to depend on GDP, real interest rate, real exchange rate, and M2/H ratio (explaining the development of banking sector in Poland). Authors conclude that the growth rate of zloty denominated deposits held both by households and by enterprises is positively correlated with real interest rate, and that this relation is stronger in the case of households. It can be said that the development of banking sector in Poland influences the growth of credits and deposits held by households, but it does not affect the behaviour of firms. It seems that GDP influences the growth rate of deposits, while it has no effect on the demand for credits in Poland. A change in the real interest rate matters only for corporate actions.