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SAVINGS and economic growth: a historical analysis of the relationship between savings and economic growth in the CAPE Colony economy, 1850-1909

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  • Verhoef, Grietjie
  • Greyling, Lorraine
  • Mwamba, John

Abstract

Abstract The sub-optimal savings propensity in South Africa the past three decades causes concern for the ability of the country to support its economic development. An historical analysis of the development of the savings’ trends in South Africa may assist in understanding the historical roots of the phenomenon. Apart from general descriptions of the nature of economic activity in the Cape Colony very little is known about the role financial sector development and savings played in the growing colonial economy. This paper explores the performance of the economy of the Cape Colony between 1850 and 1909, through the business cycles, financial sector stability, the nature and extent of economic activity and seeks to explain the relationship between savings and economic growth. The question is whether the general view that ‘financial development is robustly growth promoting’ can be substantiated in the last half of the nineteenth century Cape Colony? It contributes to the economic history literature on the colonial past of South Africa by using newly compiled data on the GDP of the Cape Colony during the last half of the nineteenth century. The paper finds that despite the expectations in the literature that financial deepening contributes to economic growth; the Cape Colony did not display such causal relationship between savings and economic growth in the period under review. The paper shows the different forms of savings in the colony and the trend of savings behavior in the period amidst the development of a relatively robust financial sector.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 47819.

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Date of creation: 22 Jun 2013
Date of revision: 19 Jun 2013
Handle: RePEc:pra:mprapa:47819

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Keywords: Keywords: Cape colony; economic growth; financial deepening; gross domestic product; savings.;

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  1. Jeremy Greenwood & Boyan Jovanovic, 1989. "Financial Development, Growth, and the Distribution of Income," NBER Working Papers 3189, National Bureau of Economic Research, Inc.
  2. Abu-Bader, Suleiman & Abu-Qarn, Aamer, 2005. "Financial Development and Economic Growth: Time Series Evidence from Egypt," MPRA Paper 1113, University Library of Munich, Germany.
  3. Demetriades, Panicos O. & Hussein, Khaled A., 1996. "Does financial development cause economic growth? Time-series evidence from 16 countries," Journal of Development Economics, Elsevier, vol. 51(2), pages 387-411, December.
  4. Hyoungsoo Zang & Young Chul Kim, 2007. "Does financial development precede growth? Robinson and Lucas might be right," Applied Economics Letters, Taylor & Francis Journals, vol. 14(1), pages 15-19.
  5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  6. Odedokun, M. O., 1996. "Alternative econometric approaches for analysing the role of the financial sector in economic growth: Time-series evidence from LDCs," Journal of Development Economics, Elsevier, vol. 50(1), pages 119-146, June.
  7. James B. Ang & Warwick J. McKibbin, 2005. "Financial Liberalization, Financial Sector Development And Growth: Evidence From Malaysia," CAMA Working Papers 2005-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  8. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  9. Klaus Neusser & Maurice Kugler, 1998. "Manufacturing Growth And Financial Development: Evidence From Oecd Countries," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 638-646, November.
  10. Christopoulos, Dimitris K. & Tsionas, Efthymios G., 2004. "Financial development and economic growth: evidence from panel unit root and cointegration tests," Journal of Development Economics, Elsevier, vol. 73(1), pages 55-74, February.
  11. Stern, Nicholas, 1989. "The Economics of Development: A Survey," Economic Journal, Royal Economic Society, vol. 99(397), pages 597-685, September.
  12. Luintel, Kul B. & Khan, Mosahid, 1999. "A quantitative reassessment of the finance-growth nexus: evidence from a multivariate VAR," Journal of Development Economics, Elsevier, vol. 60(2), pages 381-405, December.
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