Are saving and investment cointegrated: evidence from some African countries' data

Purpose - – The purpose of this paper is to test the Feldstein and Horioka (FH), theory that capital mobility should be low if there is high correlation between saving and investment, in some African countries. Design/methodology/approach - – This paper tests the cointegration between saving and investment using bounds testing approach to cointegration and derive the long-run elasticities using autoregressive-distributed lag (ARDL) and Phillips-Hansen fully modified OLS for African countries over the period 1960-2008. This paper conducted the test for unit root properties using Augumented Dick-Fuller procedure. Findings - – Their main findings are: investment and saving are strongly cointegrated for The Gambia and Burkina Faso and marginally cointegrated for Ghana, Mali, Cote d'Ivoire and Benin when investment is the dependent variable and there is evidence of cointegration between saving and investment when saving is the dependent variable for Senegal and Niger and no evidence of cointegration for Cameroon, Chad and Togo; the long-run coefficients on saving are low or negative implying low correlation. This paper concludes that Feldstein and Horioka theory could not be ruled out in African countries investigated. Originality/value - – This paper is the original paper conducted on West African countries. This study has not across any paper bearing the same title on the countries of coverage.