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Private savings play a pivotal role in financing development and sustaining growth. Recently, there have been many theoretical developments that underpin key determinants of savings behavior, many of which merit empirical investigation. Understanding the dynamics of the determinants of savings is crucial to inform economic policy and devise reform programs. This paper builds on earlier work examining the stability of the long-run relationship between the real interest rate, financial saving, and total saving during 1960 to 1990. The paper extends the scope of the empirical investigation of the determinants of private savings behavior in the Arab Republic of Egypt, and considers the effect of financial development. The analysis uses quarterly data covering 1991-2010, adopting a vector error correction model. The key findings attest that private savings in Egypt follow the Life Cycle Model in the long term. Controlling for population growth, the analysis finds that the real interest rate and financial development are key determinates for real private savings in the long run. The negative long-run relation between the real interest rate and private savings holds under the proposed model structure as well as for that in the earlier work. However, in the short run, inflation and exchange rate movements are key determinants for private savings decisions. Robust economic policies, inclusive of macroeconomic and monetary measures, are prerequisites for maximizing private savings and financing growth in Egypt.

Life Cycle Model --- Permanent Income Hypothesis --- Savings --- Time-Series Models --- Uncertainty

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Univariate studies of the hypothesis of unit roots in real exchange rates have yielded consensus point estimates of the half-life of deviations from purchasing power parity of between three to five years. However, least squares-based estimates of half-lives are biased downward. Accordingly, we follow Andrews (1993) and use median-unbiased estimators of the half-life of deviations from parity as a preferred measure of the persistence of real exchange rate shocks. We study this issue using real effective exchange rate (REER) data for 22 industrial countries in the post-Bretton Woods period. Three methods of bias correction are implemented, which yield cross-country averages of half-lives of deviations from parity ranging between 4 to 15 years, with the REER of several countries displaying permanent deviations from parity.

Foreign Exchange --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Currency --- Foreign exchange --- Real exchange rates --- Purchasing power parity --- Real effective exchange rates --- Exchange rates --- Exchange rate modelling --- Iceland

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Money demand is critical for defining monetary policy options and is not driven necessarily by developed country standards of transaction demand, speculation motive, and opportunity costs grounded by fully functioning financial markets. However, market imperfections in less developed economies can also play a critical role in the dynamics of demand for money. This paper estimates a vector equilibrium correction model to investigate the nature of short-term and long-term interactions for money demand in the Arab Republic of Egypt. The paper concludes that real money demand in Egypt during (1958-2013) is stable and can be considered confidently by monetary authorities to adjust for long-term growth in the real economy. The rate of devaluation of the official exchange rate and inflation have a serious effect on the public's trust in the national currency in the long term. Money is not neutral for long-term portfolio decisions, because of the increase in real income in the economy that couples with an uptrend in monetization as the ratio of money stock over output also uptrends. The paper also provides quantitative evidence that the devaluation within the parallel market is negatively related to the change in demand for real money balances in the short term. Economic agents hold more domestic currency if the official exchange rate slides, and arbitrage opportunities are sought in the parallel market.

Currencies and Exchange Rates --- Debt Markets --- Economic Reform Policies --- Economic Theory & Research --- Emerging Markets --- Finance and Financial Sector Development --- Fiscal & Monetary Policy --- Macroeconomics and Economic Growth --- Model Evaluation --- Money Demand --- Private Sector Development --- Selection --- Time-Series Models --- Validation

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The paper introduces “system priors”, their use in Bayesian analysis of econometric time series, and provides a simple and illustrative application. System priors were devised by Andrle and Benes (2013) as a tool to incorporate prior knowledge into an economic model. Unlike priors about individual parameters, system priors offer a simple and efficient way of formulating well-defined and economically-meaningful priors about high-level model properties. The generality of system priors are illustrated using an AR(2) process with a prior that most of its dynamics comes from business-cycle frequencies.

Econometrics. --- Economics, Mathematical --- Statistics --- Macroeconomics --- Bayesian Analysis: General --- Model Construction and Estimation --- Methodological Issues: General --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Economic growth --- Business cycles

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In this paper, the behavior of China’s imports during the period 1980-92 is studied. The estimation of cointegration and error correction mechanisms enables the separation of the long-run and short-run determinants of imports in China. The estimated cointegrating vector using Johansen’s cointegration approach shows that, in the long run, China’s imports are sensitive to changes in output, relative prices, and foreign exchange reserves. It also shows that the short-run output elasticity of imports is much greater than that in the long run, suggesting that import substitution may have been an important factor over the sample period. The forecasting ability of a conventional partial adjustment import function is then compared with that of the Johansen cointegration model; the Johansen model is shown to outperform the conventional one in forecasting accuracy.

Banks and Banking --- Exports and Imports --- Foreign Exchange --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Econometric and Statistical Methods: Special Topics: Other --- Empirical Studies of Trade --- Trade: General --- Monetary Policy --- International economics --- Banking --- Currency --- Foreign exchange --- Imports --- International reserves --- International trade --- Central banks --- Foreign exchange reserves --- China, People's Republic of