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On the Causality Between Saving and Growth: Long- and Short-Run Dynamics and Country Heterogeneity

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  • Andersson, Björn

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    (Department of Economics)

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    Abstract

    The temporal interdependence between saving and output has been in focus in a number of recent empirical studies. Results from these studies have compelled some authors to question the traditional notion of a causal chain where saving leads growth through capital accumulation. This paper contributes to this literature. As opposed to the previous studies, which have mainly utilised panel-estimation methods, the tests of causal chains here are carried out in time-series settings. Saving and GDP are estimated in bivariate vector autoregressive or vector error-correction models for Sweden, UK, and USA, and tests of Granger non-causality are performed within the estimated systems. The main results show that the causal chains linking saving and output differ across countries, and also that causality associated with adjustments to long-run relations might go in different directions than causality associated with short-term disturbances.

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    Bibliographic Info

    Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 1999:18.

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    Length: 29 pages
    Date of creation: 15 Oct 1999
    Date of revision:
    Handle: RePEc:hhs:uunewp:1999_018

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    Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
    Phone: + 46 18 471 25 00
    Fax: + 46 18 471 14 78
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    Web page: http://www.nek.uu.se/
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    Keywords: Saving; growth; Granger-causality; cointegration; VAR; VECM;

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