## Cyprus: Selected Issues

_IMF Staff Country Reports, October 22, 2014_

## Source details

**Canonical URL:** [Cyprus: Selected Issues](https://www.imf.org/en/publications/cr/issues/2016/12/31/cyprus-selected-issues-42407)

## Other formats

- [Markdown version](/en/publications/cr/issues/2016/12/31/cyprus-selected-issues-42407/index.md)
- [Structured JSON version](/en/publications/cr/issues/2016/12/31/cyprus-selected-issues-42407/index.json)
- [Bundle manifest](/en/publications/cr/issues/2016/12/31/cyprus-selected-issues-42407/bundle-manifest.json)

## Bibliographic details
- Published: October 22, 2014
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498371018.002

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### Purpose and approach
- Models the evolution of the saving rate to help shed light on its determinants and to inform medium-term projections.
- Uses macro-level regression analysis linking household net wealth and unemployment to the saving rate.
- Lacks micro-level data; distributional aspects of wealth and heterogeneity in household responses are not explored.

### Key findings
- Household net wealth and unemployment are identified as key determinants of the saving rate in Cyprus.
- Cypriot households dissaved in the period preceding the global crisis as wealth increased and credit financed consumption.
- Data uncertainty may affect regression results due to:
  - Various data sources used.
  - Relatively short time-period.
- Endogeneity concerns:
  - Endogeneity between household wealth and the saving rate may not have been fully controlled through lags.
  - Endogeneity between unemployment and the saving rate may not have been fully controlled through lags.
- Distributional caveat:
  - Wealth is likely distributed unevenly; high indebted households with limited wealth are likely to reduce their saving rate more than the average to support consumption in the face of economic stress.
- Projections caveat:
  - Forward-looking projections are subject to considerable uncertainty and should be interpreted with care.

### Policy implications and considerations
- Monitoring household net wealth and unemployment is important for assessing saving behavior and medium-term consumption dynamics.
- Data improvements:
  - Enhance data sources and lengthen time-series to reduce uncertainty in econometric estimates.
  - Collect micro-level household data to assess distributional impacts and heterogeneity in saving responses.
- Analytical robustness:
  - Address endogeneity more fully (beyond lagged controls) to strengthen causal inference between wealth, unemployment, and saving.
- Cautious use of projections:
  - Use forward-looking saving-rate projections with caution given considerable uncertainty.

### Subject tags and keywords (as provided)
- Subject: Expenditure, Fiscal policy, Fiscal stance, Housing prices, Labor, Potential output, Prices, Production, Wages
- Keywords: CR, Cyprus, Europe, Fiscal stance, Global, house price, Housing prices, IMF staff estimate, ISCR, Potential output, price, production-function approach, saving rate, valuation gap, Wages

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## Content in this bundle

- **Cyprus: Selected Issues; IMF Country Report 14/314; October 3, 2014**
  - [Cyprus: Selected Issues; IMF Country Report 14/314; October 3, 2014 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2014/_cr14314.pdf.md){rel="alternate" type="text/markdown"}
  - [Cyprus: Selected Issues; IMF Country Report 14/314; October 3, 2014 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2014/_cr14314.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2016/12/31/cyprus-selected-issues-42407_