This paper analyzes and reconciles macro and micro
evidence on savings and factors that affect savings, as well
as possible policy implications. At the aggregate level,
the main question is how savings are affected by growth
and macroeconomic policies and variables (fiscal policy,
exchange rate, for example) and the breadth of financial
markets. Some of these macro determinants can be
reconciled with microeconomic evidence of the savings
behavior of households. Using macroeconomic quarterly
data and household survey data, the analysis explores the
determinants of the savings rate at the macroeconomic
and microeconomic levels, using the typical econometric
models used in the literature (long-term co-integration
relation and short-term error correction model for the
macro determinants; linear multivariate models for
the micro determinants). The long-term relationship
indicates that a 10-percent increase in gross domestic
product per capita would add 3.7 percentage points
to the savings rate in the long run. The short-term
relationship depicts a strong catch-up process to the
long-run equilibrium, with quarterly changes in gross
domestic product per capita and openness strongly
correlated with quarterly changes in the savings rate. The
characteristics of households that represent the volatility
of expected income, such as education and access to
borrowing or remittances, significantly impact saving
rates. The macroeconomic and microeconomic analyses
of the determinants of saving rates in Armenia point to
three policy areas: the macroeconomic environment, the
financial sector, and the role of remittances.