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Determinants of Savings Behavior in Pakistan: Long Term- Short Term Association and Causality

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  • Fawad AHMAD

    (FAST School of Management, NUCES-FAST, Peshawar Campus, Pakistan)

Abstract

The existing studies on private savings have mostly investigated the long run and short association of different variables with private savings, whereas no known study has investigated both long run and short run causality of variables against private savings by using data of Pakistan. The current study used time series data of Pakistan over the period of 1972 to 2012 and employed long run cointegration test, first normalized equation for long run association, vector error correction model for short run association, Toda Yamamoto technique for long run causality and Granger causality test for short run causality. The results suggest that GDP per capita, inflation rate, financial development, dependency ratio and fiscal development have impact on the private savings rate in Pakistan. The findings of the current study can be used to increase the private savings’ rate. In the long run government can increase the private savings by controlling fiscal deficit and promoting the investment by private investors. Whereas, in the short run, government can increase the deposit rate to increase the private savings. The current study is unique in its nature as it simultaneously provides the long run and short run causality and association and can contribute significantly in improving savings rate in developing economies like Pakistan.

Suggested Citation

  • Fawad AHMAD, 2015. "Determinants of Savings Behavior in Pakistan: Long Term- Short Term Association and Causality," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 8(1), pages 103-136, June.
    • Handle: RePEc:wun:timjeb:tjeb:v08:y2015:i01:a02
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    Citations

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    Cited by:

    1. Aramish Altaf Alvi & Arooj Fatima, 2017. "Domestic Saving Under the Perspective of Interest Rate, unemployment and inflation in Pakistan: A Time Series Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 6(1), pages 15-27, March.
    2. Kunofiwa TSAURAI, 2018. "Determinants Of The Percentage Of Savings In Emerging Markets: A Panel Data Analysis Approach, 1995-2015," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 18(2), pages 25-40.
    3. Tehreem Pervez, 2021. "The Role of Interest Rate, Unemployment and Inflation in Deciding Domestic Saving of Pakistan: An Empirical Analysis," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 7(1), pages 26-35, March.

    More about this item

    Keywords

    Savings; Life Cycle; Precautionary Savings; Financial Development; Absolute Income Hypothesis.;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H8 - Public Economics - - Miscellaneous Issues
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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