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The point of this question is to get a sense of what is it like to earn more than needed for consumption in a middle income, high inflation economy.

Specifically consider large middle income South American economies that have historically experienced high inflation such as Argentina (per capita GDP 10K USD, PPP more than double that) or Brazil (per capita GDP 7K USD, PPP more than double that). The chart shows that even in a high inflation economy like Argentina a large part of GDP can be saved. This is a chart of domestic savings which is not the same as household savings because it probably includes corporate and government savings. It would be good to determine how much households save and specifically the households that do not have a household member working for a government. In other words, I am interested in the savings of people who are not entitled to the kind of pension paid to former government workers.

Argentina domestic savings

Specifically what are the characteristics of private sector workers' household savings? DB means defined benefit savings and DC means defined contribution savings. Is it common for companies to offer DC plans in these economies? Are workers allowed to direct contributions to DC plans in the way of controlling the mix of equity, bonds, and guaranteed investments, and the currency denomination of those investments? For example suppose a household can save 15% of income. Would this household be able to put the entire amount into a U.S. Treasury bond fund or U.S. large cap equity fund or a mix of these? How much of private sector workers' household income is being saved? How much of this private sector workers' saving is in land and buildings?

To supply some context, inflation in Argentina in recent years is graphed here...

Argentina inflation

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Can't speak of Brazil, but it's common that Argentina's household saving is directed to durable goods (land and houses) and FX currency (US Dollars). There's little saving going into bonds and equity.

This can be seen in many ways. For example, the volume of financial markets vs. GDP is really low and volatility is usually quite high. On the other hand, house prices and FX rates tend to have very rigid prices and rarely go down nominally, with agents adjusting quantities instead. As an extreme case, consider that, nowadays, the ratio between the income you'd get from renting an apartment in Argentina and the property value is on par with the yield of a T-Bill, which goes to show its dual function as a place to live and as a good meant to be saved.

P.S.: Beware Argentina's inflation metrics, they were falsified between 2007-2016. I recommend using this dataset from the Million Prices Project, instead: http://www.inflacionverdadera.com/argentina/english/

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    $\begingroup$ This article says that in Argentina people use bricks as an asset. A quote... "The value of bricks is fairly stable, and they’re useful to a family building out their house. Argentina doesn’t have a mortgage industry, and thus buying a pallet of bricks each time you get a paycheck is an effective way to pay for your home in installments." freethink.com/technology/crypto-argentina-black-market-cash $\endgroup$
    – H2ONaCl
    Commented Aug 16, 2022 at 19:54
  • $\begingroup$ Indeed, the article resonates with the answer I gave. Inflation makes ARS an undesirable asset (if it weren't for the convenience yield). Assets like bank-backed FX or bonds were and are always at risk of default or compulsory restructuring. That leaves only FX cash in your home or, ironically, in a rented security box at a bank, as well as real estate, which are more resilient (for now) to be taken by the government. Cryptos are still too new. $\endgroup$ Commented Aug 31, 2022 at 2:04
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Inflation can change saving pattern in short-term but not in long-term. Nominal interest rates can be decomposed using the Fisher equation as:

$$i \approx p +r$$

Usually in high inflation countries nominal interest rate is high to compensate for higher inflation so high inflation should not matter for saving decision that much. Word Bank data says that real interest rate, that is corrected for inflation, in Argentina was 2019 as much as 11%.

Real interest rate determines saving in the long-run not inflation.

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  • $\begingroup$ This does not even try to answer the question. $\endgroup$
    – H2ONaCl
    Commented Nov 17, 2021 at 6:13
  • $\begingroup$ @H2ONaCl how come? I explain that inflation does not affect savings in Argentina. Wasn't your question about that? $\endgroup$
    – WilliamT
    Commented Nov 17, 2021 at 12:23

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