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Financial sector development and domestic savings in South Asia

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  • Sahoo, Pravakar
  • Dash, Ranjan Kumar

Abstract

Given the limited capital flows to developing countries in South Asia, domestic savings is the primary source of investment and growth. Financial sector development and access to financial institutions are important determinants of savings ratios in developing countries. In this context, we empirically examine the role of financial development on savings ratios of five South Asian countries after controlling for other relevant variables for the period 1975–2010 and also for two sub-periods—the pre-reforms period (1975–1991) and the post-reforms period (1992–2010). We find that financial sector development positively affects total and private savings in South Asia along with per capita income, share of agriculture and foreign savings. Results also support the humped-shaped relationship between financial development and savings. The causality results support that financial development leads to higher savings mobilisation in South Asia.

Suggested Citation

  • Sahoo, Pravakar & Dash, Ranjan Kumar, 2013. "Financial sector development and domestic savings in South Asia," Economic Modelling, Elsevier, vol. 33(C), pages 388-397.
    • Handle: RePEc:eee:ecmode:v:33:y:2013:i:c:p:388-397
    DOI: 10.1016/j.econmod.2013.04.018
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    8. Zeng, Miao & Du, Jiang & Zhu, Xiaoyu & Deng, Xin, 2023. "Does internet use drive rural household savings? Evidence from 7825 farmer households in rural China," Finance Research Letters, Elsevier, vol. 57(C).
    9. Marina Malkina, 2019. "Determinants of Private Savings in the Form of Bank Deposits: A Case Study on Regions of the Russian Federation," Economies, MDPI, vol. 7(2), pages 1-22, June.
    10. Brian Muyambiri & John-Baptiste Mabejane, 2023. "The Nexus Of External Debt, Private Investment And Financial Development: Evidence From Selected Sacu Countries," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 21(1), pages 25-40, May.
    11. Shreya Pal, 2024. "The International Capital Flows and Domestic Savings–domestic Investment Nexus: A Comparative Evidence Between Heterogeneous Developing Regions," South Asian Journal of Macroeconomics and Public Finance, , vol. 13(2), pages 169-212, December.
    12. Ranjan Kumar Dash, 2020. "Impact of Remittances on Domestic Investment: A Panel Study of Six South Asian Countries," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 21(1), pages 7-30, March.
    13. Irma Didelija, 2019. "Analysis Of Empirical Literature Of Saving Determinants," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 4(12), pages 111-120, December.
    14. Raihan, Selim & Osmani, S.R. & Khalily, M.A. Baqui, 2017. "The macro impact of microfinance in Bangladesh: A CGE analysis," Economic Modelling, Elsevier, vol. 62(C), pages 1-15.
    15. Pravakar Sahoo & Ashwani Bishnoi, 2021. "IMPACT OF OUTWARD FDI: Evidence from Emerging Economies for Policy," IEG Working Papers 433, Institute of Economic Growth.
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    18. Owusu-Agyei, Samuel & Okafor, Godwin & Chijoke-Mgbame, Aruoriwo Marian & Ohalehi, Paschal & Hasan, Fakhrul, 2020. "Internet adoption and financial development in sub-Saharan Africa," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
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    20. Pravakar Sahoo & Ranjan Kumar Dash, 2017. "What Drives India's Surge in Service Exports?," The World Economy, Wiley Blackwell, vol. 40(2), pages 439-461, February.
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    22. Delwar Hossain, 2014. "Differential Impacts of Foreign Capital and Remittance Inflows on Domestic Savings in the Developing Countries: A Dynamic Heterogeneous Panel Analysis," Departmental Working Papers 2014-07, The Australian National University, Arndt-Corden Department of Economics.
    23. Emara, Noha & KASA, Hicran, 2020. "The Non-Linear Relationship between Financial Access and Domestic Savings," MPRA Paper 99256, University Library of Munich, Germany.

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    More about this item

    Keywords

    Financial development; Savings; Determinants; South Asia;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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