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Does Income Level affect Saving Behaviour in Pakistan? An ARDL approach to co-integration for empirical assessment

Author

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  • Muhammad Farhan

    (Hailey College of Commerce University of the Punjab, Lahore – Pakistan)

  • Muhammad Akram

    (Hailey College of Commerce, Faculty of Commerce University of the Punjab, Lahore – Pakistan)

Abstract

The purpose this study was to identify the short-run and long-run relationship between income level and saving behaviour in Pakistan along with inflation and age dependency ratio by using co-integration and error correction model (ECM) for the period of 1985-2009. Auto regressive distributed lag (ARDL) model, bounds testing approach to co-integration were used to delineate the short- run and long –run relationship between income level and saving behavior. It is found that in short and long-run, income levels acquire highly significant and positive relationship with the saving behavior in case of Pakistan. This was the first attempt made by the researcher to estimate the income level effect on saving behaviour in case low income developing country like Pakistan. Given that Pakistan capital market is growing, the empirical assessment has direct policy relevance.

Suggested Citation

  • Muhammad Farhan & Muhammad Akram, 2011. "Does Income Level affect Saving Behaviour in Pakistan? An ARDL approach to co-integration for empirical assessment," Far East Journal of Psychology and Business, Far East Research Centre, vol. 3(5), pages 62-72, June.
    • Handle: RePEc:fej:articl:v:3c:y:2011:i:5:p:62-72
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    Cited by:

    1. Shaikh, Salman, 2012. "Consumption & Savings Behavior in Pakistan," MPRA Paper 42496, University Library of Munich, Germany.
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    3. repec:ipg:wpaper:2014-411 is not listed on IDEAS
    4. Shahbaz, Muhammad & Nawaz, Kishwer & AROURI, Mohamed El Hedi & Teulon, Frédéric, 2013. "Does The Keynesian Absolute Income Hypothesis Exist in Pakistan?," MPRA Paper 47923, University Library of Munich, Germany, revised 01 Jul 2013.
    5. Shaikh, Salman, 2013. "Micro Foundations of Savings Behavior in Urban Pakistan," MPRA Paper 53805, University Library of Munich, Germany.
    6. Shahbaz, Muhammad & Nawaz, Kishwar & Arouri, Mohamed & Teulon, Frédéric & Uddin, Gazi Salah, 2013. "On the validity of the Keynesian Absolute Income hypothesis in Pakistan: An ARDL bounds testing approach," Economic Modelling, Elsevier, vol. 35(C), pages 290-296.

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    More about this item

    Keywords

    Savings; Pakistan; Income level; ARDL; Life-cycle hypothesis;
    All these keywords.

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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