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
Date Written: March 3, 2015
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
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