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The impact of demography, growth and public policy on household saving: a case study of Pakistan

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  • Mohsin Hasnain Ahmad

    (University of Karachi, Pakistan)

  • Zeshan Atiq

    (University of Karachi, Pakistan)

  • Shaista Alam

    (University of Karachi, Pakistan)

  • Muhammad S. Butt

    (University of Karachi, Pakistan)

Abstract

The present study investigates the behaviour of household saving by employing the Johansen-Juselius cointegration technique and error correction model to determine the long run and short run dynamics of the system respectively using “time-series” data for Pakistan over the period 1972-2003. The study found the existence of one cointegrating vector, indicating a valid long run economic relationship among the determinants of household saving. The study established that there exists a valid long run inverse relationship between household saving and demographic variables. The results also reveal that income and growth variables have a significant positive effect on household saving. Similarly, the positive impact of real interest rates on saving indicates that the substitution effect dominates the income effect in Pakistan. The study also found that the rate of inflation affects household saving rate negatively. Furthermore, public saving ‘crowds-out’ private saving less proportionately in Pakistan, than in other comparable cases.

Suggested Citation

  • Mohsin Hasnain Ahmad & Zeshan Atiq & Shaista Alam & Muhammad S. Butt, 2006. "The impact of demography, growth and public policy on household saving: a case study of Pakistan," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 13(2), pages 57-71, December.
    • Handle: RePEc:unt:jnapdj:v:13:y:2006:i:2:p:57-71
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    References listed on IDEAS

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    Cited by:

    1. Aramish Altaf Alvi & Arooj Fatima, 2017. "Domestic Saving Under the Perspective of Interest Rate, unemployment and inflation in Pakistan: A Time Series Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 6(1), pages 15-27, March.
    2. Irma Didelija, 2019. "Analysis Of Empirical Literature Of Saving Determinants," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 4(12), pages 111-120, December.
    3. Eric Asare & Eduardo Segarra & Nakakeeto Gertrude & Fafanyo Asiseh, 2018. "Explaining the Saving Behavior of Households¡¯ in Ethiopia, Africa," Applied Economics and Finance, Redfame publishing, vol. 5(2), pages 143-151, March.
    4. Ismail, Aisha & Rashid, Kashif, 2013. "Determinants of household saving: Cointegrated evidence from Pakistan (1975–2011)," Economic Modelling, Elsevier, vol. 32(C), pages 524-531.
    5. Nina Ellorah A Chua & Shaira Kasey L Kiong & Kristine Honey M Villa & Ronald B Paguta, 2016. "A Tobit Analysis of the Determinants and Potentials of Savings in the Case of Payatas Households," Information Management and Business Review, AMH International, vol. 8(3), pages 47-57.
    6. Asmatullah & Bashir Ahmad Khilji & Syed Waqar Hussain & M. Khalid Mughal, 2012. "Revisiting The Householdâ??s Savings Function In Karak, Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 4(1), pages 23-29, April.
    7. Tehreem Pervez, 2021. "The Role of Interest Rate, Unemployment and Inflation in Deciding Domestic Saving of Pakistan: An Empirical Analysis," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 7(1), pages 26-35, March.

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