This article reviews the current state of knowledge on the determinants of saving rates, presenting the main findings and contributions of the recently completed World Bank research project, "Saving Across the World." The article discusses the basic design of the research project and its core database, the World Saving Database. It then summarizes the main project results and places them in the context of the literature on saving, identifying the key policy and nonpolicy determinants of private saving rates. Special attention is paid to the relationship between growth and saving and the impact of specific policies on saving rates. The article concludes by introducing the studies included in this special issue.

FDI flows to developing countries surged in the 1990s, to become their leading source of external financing. This rise in FDI volume was accompanied by a marked change in its composition: investment taking the form of acquisition of existing assets (M&A) grew much more rapidly than investment in new assets ("greenfield" FDI), particularly in countries undertaking extensive privatization of public enterprises. This raises two issues. First, is the M&A boom a one-time effect of privatization, or is it likely to be followed by a rise in greenfield investment? Second, do these two types of FDI have different macroeconomic causes and consequences -in relation to aggregate investment and growth? This paper focuses on establishing the stylized facts in terms of time precedence between both types of FDI, investment and growth, using annual data for the period 1987-2001 and a large sample of industrial and developing countries. We find that in all samples higher M&A is typically followed by higher greenfield investment, while the reverse is true only for developing countries. In industrial and developing countries alike, both types of FDI lead domestic investment, but not the reverse. Finally, neither type of FDI appears to precede economic growth in either developing or industrial countries, but FDI does respond positively to increases in the growth rate.

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Loayza, Schmidt-Hebbel, and Serven investigate the development are an indirect but effective way to raise policy and nonpolicv factors behind saving disparities, private saving rates. using a large panel data set and an encompassing Predictions of the life-cycle hypothesis are approach including several relevant determinants of supported in that dependency ratios generally have a private saving. They extend the literature in several negative effect on private saving rates. dimensions by:The precautionary motive for saving is supported by * Using the largest data set on aggregate saving the finding that inflationconventionally taken as a assembled to date.summary measure of macroeconomic volatilityhas a * Using panel instrumental variable techniques to positive impact on private saving, holding other facts correct for endogeneity and heterogeneity.constant. * Performing robustness checks on changes in * Fiscal policy is a moderately effective tool for raising estimation procedures, data samples, and model national saving. specification.* The direct effects of financial liberalization are Their main empirical findings: largely detrimental to private saving rates. Greater * Private saving rates show considerable inertia (are availability of credit reduces the private saving rate; highly serially correlated even after controlling for other financial depth and higher real interest rates do not relevant factors). increase saving. * Private saving rates rise with the level and growth rate of real per capita income. So policies that spur This papera product of Macroeconomics and Growth, Development Research Groupis part of a larger effort in the group to understand the determinants of saving in developing countries.

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