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Savings and investment in developing countries : Granger causality test

Author

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  • Mohammad Afzal

    (Gomal University, D.I. Khan)

Abstract

Additional evidence on savings and investment relationship in developing countries has been provided using conventional and time-series econometrics techniques. This paper finds no long-run relationship between savings and investment in seven countries of the sample, which implies increased degree of capital mobility and weakening of savings and investment relationship since early 1970s. There is bidirectional causality between savings and investment in South Africa, while there is unidirectional causality from savings to investment in Pakistan and Sri Lanka. There is no causality in India, Philippines, Malaysia, and Iran. This divergence might be due to country-specific policies and economic conditions. Strong correlation between savings and investment does not rule out capital mobility across countries.

Suggested Citation

  • Mohammad Afzal, 2007. "Savings and investment in developing countries : Granger causality test," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 44(2), pages 99-110, December.
    • Handle: RePEc:phs:prejrn:v:44:y:2007:i:2:p:99-110
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    File URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/230/627
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    Citations

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    Cited by:

    1. Sharafat, Ali & Hamid, Waqas & Muhammad, Asghar & Raheel Abbas, Kalroo & Muhammad, Ayaz & Mukhtyar, Khan, 2013. "Foreign Capital and Investment in Pakistan: A Cointegration and Causality Analysis," MPRA Paper 55640, University Library of Munich, Germany, revised 28 Apr 2013.
    2. Rajarshi Mitra, 2017. "Domestic Saving-Investment Correlation Puzzle Revisited: A Time Series Analysis for South Africa," Economics Bulletin, AccessEcon, vol. 37(2), pages 1217-1225.

    More about this item

    Keywords

    savings; investment; capital mobility; causality;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F30 - International Economics - - International Finance - - - General

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