Short Run and Long Run Saving Behavior in Pakistan: An Empirical Investigation

Journal of Money, Investment and Banking ISSN 1450-288X Issue 16 (2010)

10 Pages Posted: 9 Mar 2015 Last revised: 6 May 2015

See all articles by Imran Chaudhry

Imran Chaudhry

Bahauddin Zakariya University - Department of Economics

Muhammad Zahir Faridi

Bahauddin Zakarya University Multan

Muhammad Abbas

Government of the United States of America - Air University

Dr. Furrukh Bashir

University of the Punjab (PU) - Department of Economics; The Islamia University of Bahawalpur, Pakistan

Date Written: March 3, 2015

Abstract

The paper attempts to investigate the determinants of national savings of Pakistan in the long run as well as in the short run using time series annual data from 1972 to 2008. This paper applies the time series econometrics for short run and long run relationships. All variables are found stationary at 1st difference. The empirical results fully support the Johansen Co-integration and Vector Error Correction Model analyses. The results conclude that the consumer price index, exports, workers remittances, public loans, government spending and rate of interest turn out to be very significant factors in determining the national savings in long run. It is found that consumer price index, workers remittances, interest rate, exports and government consumption have positive impact on national savings of Pakistan while public loans influenced negatively in the long run. Speed of adjustment or error term has value 0.9664 with negative sign, shows the convergence of saving model towards long run equilibrium. Keeping in view the importance and role of national savings in macroeconomic stability, It is suggested that government should improve the level of national savings for sustainable and debit free economy by considering the significant variables from empirical analysis of this study.

Keywords: National Savings; Macroeconomic Variables; Co-integration; Error Correction Model; Pakistan

Suggested Citation

Chaudhry, Imran and Faridi, Muhammad Zahir and Abbas, Muhammad and Bashir, Furrukh, Short Run and Long Run Saving Behavior in Pakistan: An Empirical Investigation (March 3, 2015). Journal of Money, Investment and Banking ISSN 1450-288X Issue 16 (2010) . Available at SSRN: https://ssrn.com/abstract=2573878

Imran Chaudhry

Bahauddin Zakariya University - Department of Economics ( email )

Multan
Pakistan

Muhammad Zahir Faridi

Bahauddin Zakarya University Multan ( email )

Bosan Road
Multan, PA Punjab 60800
Pakistan

Muhammad Abbas

Government of the United States of America - Air University ( email )

United States

Furrukh Bashir (Contact Author)

University of the Punjab (PU) - Department of Economics ( email )

Lahore
Pakistan

The Islamia University of Bahawalpur, Pakistan ( email )

Bahawalpur, Punjab 63100
Pakistan

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