Old Wine in New Bottles: Saving – Growth Nexus: Innovative Accounting Technique in Pakistan

Abstract

The paper re-investigates the relationship between economic growth and domestic savings by applying new approaches rather than old techniques. The cointegration and causality approaches have been applied for economic growth and domestic savings. In doing so, ARDL Bounds Testing, Johanson cointegration approaches are employed to examine for long run association while Innovative Accounting Techniques and Toda and Yamamoto (1995) for causal relationship has been applied. Ng-Perron de-trended test is used for order of integration of running actors. Results reveal that there exists a long run relationship between economic growth and domestic savings and their association is robust at least in long span of time. Causal results through innovative accounting technique assert that there is one-way causality running from economic growth to domestic savings while very weak from opposite side. Results by Toda and Yamamoto’s technique also confirm that economic growth leads domestic savings in Pakistan.

Keywords: economic growth; savings; causality; ARDL

JEL Classification: O0, E22, C32