Vol 5 No 2 (2018)
Articles

Analyzing the Savings-Investment Trend in a Panel of G-7 Countries

Abdul Mansoor
Department of Economics, University of Wah, Pakistan
Baserat Sultana
Department of Economics, University of Wah, Pakistan
Romana Saeed
Department of Economics, University of Wah, Pakistan
Published December 10, 2018
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Keywords
  • Savings, Investment, Panel co-integration, Panel VAR, G-7 countries.
Citations
How to Cite
Mansoor, A., Sultana, B., & Saeed, R. (2018). Analyzing the Savings-Investment Trend in a Panel of G-7 Countries. Asian Journal of Economics and Empirical Research, 5(2), 147-154. https://doi.org/10.20448/journal.501.2018.52.147.154

Abstract

This study examined the relationship between savings and investment in the G-7 countries for the period of 1970 to 2015. The stationary analysis of the data has been done by adopting the panel Levin, Lin & Chu, Breitung, Pesaran & Shin, ADF-Fisher & PP-Fisher criteria while the long run relationship has been tested by employing the Pedroni residual test of co-integration. The results neglected the existence of a long run correlation between saving and investment in G-7 countries. Further, joint causality between the savings and investment has also been tested using the fixed effect VAR model. Wald test explains that the two consecutive lags i.e. S (-1) and S (-2) of savings is jointly causing savings in the current year in the G7 countries. While the same two lags of investment i.e. I (-1) and I (-2) does not jointly granger cause savings in the G7 economies. The results are in line with Feldstein and Horioka (1980) that there is a stable and significant association between the increasing rates of savings and investment in the short run while this relationship weaken in the long run.

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