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


Abdul Mansoor, Baserat Sultana, Romana Saeed

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.

Keywords


Savings, Investment, Panel co-integration, Panel VAR, G-7 countries.

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About this article

Title

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

Keywords

Savings, Investment, Panel co-integration, Panel VAR, G-7 countries.

DOI

10.20448/journal.501.2018.52.147.154

Date

2018-09-10

Additional Links

Manuscript Submission

Journal

Asian Journal of Economics and Empirical Research
Vol 5, No 2 (2018) Page: 147-154

Print ISSN

2518-010X

Online ISSN

2409-2622

Statistics

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Authors & Affiliations

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


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Asian Journal of Economics and Empirical Research

 Online ISSN: 2409-2622 | Print ISSN: 2518-010X

 

 

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