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Saving and Growth: Granger Causality Analysis with Bootstrapping on Panels of Countries

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  • László Kónya

    ()
    (Department of Economics and Finance, La Trobe University)

Abstract

This paper investigates the possibility of Granger causality between the saving ratio (the proportion of gross domestic saving in GDP) and the growth rate (annual percentage change of real per capita GDP) in eighty-four countries of the world from 1961 to 2000. For technical reason, on the basis of their per capita GDP in 1995, the countries have been classified as high-income (at least 10000 $US), medium-income (between 1000 and 10000 $US) and low- income (less than 1000 $US) countries, and the three panels of twenty-six, thirty and twenty- eight countries, respectively, are considered separately. Granger causality is tested for with a new panel-data approach based on SUR systems and Wald tests with country specific bootstrap critical values. The results indicate two-way Granger causality between the saving ratio and the growth rate in Austria, one-way causality from saving to growth in Ireland, Trinidad & Tobago and the Central African Republic, and one-way causality from growth to saving in Finland, France, Japan, Sweden, Switzerland and Niger. There is also some support to causality from saving to growth in Mauritania and from growth to saving in Saudi Arabia, but in all other cases there is no empirical evidence of Granger causality in either direction.

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Bibliographic Info

Paper provided by School of Economics, La Trobe University in its series Working Papers with number 2004.02.

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Length: 40 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:ltr:wpaper:2004.02

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Keywords: causality; saving; economic growth; bootstrapping; panel data EDIRC Provider-Institution: RePEc:edi:smlatau;

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, October.
  3. Jody Overland & Christopher D. Carroll & David N. Weil, 2000. "Saving and Growth with Habit Formation," American Economic Review, American Economic Association, vol. 90(3), pages 341-355, June.
  4. VANHOUDT, Patrick, 1997. "A fallacy in causality research on growth and capital accumulation," SESO Working Papers 1997008, University of Antwerp, Faculty of Applied Economics.
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  9. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
  10. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
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  12. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  13. Palumbo, Antonella, 1996. "Notes on Investment, Saving and Growth," Contributions to Political Economy, Oxford University Press, vol. 15(0), pages 105-15.
  14. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
  15. Orazio P. Attanasio & Lucio Picci & Antonello E. Scorcu, 2000. "Saving, Growth, and Investment: A Macroeconomic Analysis Using a Panel of Countries," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 182-211, May.
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Cited by:
  1. Odhiambo, Nicholas M., 2009. "Savings and economic growth in South Africa: A multivariate causality test," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 708-718, September.

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