IDEAS home Printed from https://ideas.repec.org/a/eaa/aeinde/v13y2013i2_14.html
   My bibliography  Save this article

National Savings And Foreign Capital In Pakistan

Author

Listed:
  • AFZAL, Muhammad

Abstract

This paper has addressed the nature of the casual relationship between national savings and foreign capital in Pakistan over the period 1960 -2010 using the Granger no-causality test based on Toda and Yamamoto (1995) procedure. The results show that no causality is found from foreign capital to savings but savings causes foreign capital when we consider the whole period (1960-2010). But for 1973-90 periods, both caused each other. No causality is found between foreign capital and savings but savings Granger-cause foreign capital in 1990-2010 periods. Income and savings Granger cause each other for all periods. The investment-savings relationship is mixed. Foreign capital is not a permanently dependable source. Pakistan has to rely on its own savings though the need for foreign capital will continue to haunt. An adequate reduction in non-development expenditure would release resources for productive investment that would raise production and employment and would result in the virtuous circle of saving-investment-growth-savings.

Suggested Citation

  • AFZAL, Muhammad, 2013. "National Savings And Foreign Capital In Pakistan," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(2), pages 197-206.
  • Handle: RePEc:eaa:aeinde:v:13:y:2013:i:2_14
    as

    Download full text from publisher

    File URL: http://www.usc.es/economet/reviews/aeid13214.pdf
    Download Restriction: No.
    ---><---

    References listed on IDEAS

    as
    1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    2. Aizenman, Joshua & Pinto, Brian & Radziwill, Artur, 2007. "Sources for financing domestic capital - Is foreign saving a viable option for developing countries?," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 682-702, September.
    3. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    4. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    5. Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December.
    6. Griffin, Keith B & Enos, J L, 1970. "Foreign Assistance: Objectives and Consequences," Economic Development and Cultural Change, University of Chicago Press, vol. 18(3), pages 313-327, April.
    7. Papanek, Gustav F, 1973. "Aid, Foreign Private Investment, Savings, and Growth in Less Developed Countries," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 120-130, Jan.-Feb..
    8. 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.
    9. Kanhaya L. Gupta, 1975. "Foreign Capital Inflows, Dependency Burden, And Saving Rates In Developing Countries: A Simultaneous Equation Model," Kyklos, Wiley Blackwell, vol. 28(2), pages 358-374, January.
    10. Papanek, Gustav F, 1972. "The Effect of Aid and other Resource Transfers on Savings and Growth in Less Developed Countries," Economic Journal, Royal Economic Society, vol. 82(327), pages 934-950, September.
    11. A. R. Kemal, 1992. "Self-Reliance and the Implications for Growth and Resource Mobilisation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 31(4), pages 1101-1110.
    12. Mosley, Paul, 1980. "Aid, Savings and Growth Revisited," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 42(2), pages 79-95, May.
    13. Zapata, Hector O & Rambaldi, Alicia N, 1997. "Monte Carlo Evidence on Cointegration and Causation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(2), pages 285-298, May.
    14. Reinhart, Carmen M. & Talvi, Ernesto, 1998. "Capital flows and saving in Latin America and Asia: a reinterpretation," Journal of Development Economics, Elsevier, vol. 57(1), pages 45-66, October.
    15. Menbere Workie Tiruneh, 2004. "An Empirical Investigation Into the Determinants of External Indebtedness," Prague Economic Papers, Prague University of Economics and Business, vol. 2004(3), pages 261-277.
    16. Ram, Rati & Zhang, Kevin Honglin, 2002. "Foreign Direct Investment and Economic Growth: Evidence from Cross-Country Data for the 1990s," Economic Development and Cultural Change, University of Chicago Press, vol. 51(1), pages 205-215, October.
    17. Gordon H. HANSON, 2001. "Should Countries Promote Foreign Direct Investment?," G-24 Discussion Papers 9, United Nations Conference on Trade and Development.
    18. Naheed Z. Khan & Eric Rahim, 1993. "Foreign Aid, Domestic Savings and Economic Growth (Pakistan: 1960 to 1988)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 32(4), pages 1157-1167.
    19. Mohammad Afzal, 2004. "Estimating saving and investment functions in Pakistan," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 41(1), pages 67-78, June.
    20. Gupta, Kanhaya L, 1975. "Foreign Capital Inflows, Dependency Burden, and Saving Rates in Developing Countries: A Simultaneous Equation Model," Kyklos, Wiley Blackwell, vol. 28(2), pages 358-374.
    21. Over, A Mead, Jr, 1975. "An Example of the Simultaneous-Equation Problem: A Note on "Foreign Assistance: Objectives and Consequences."," Economic Development and Cultural Change, University of Chicago Press, vol. 23(4), pages 751-756, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Henrik Hansen & Finn Tarp, 2000. "Aid effectiveness disputed," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(3), pages 375-398, April.
    2. P. B. Eregha, 2013. "Aid Flows and Growth Diagnosis: Empirical Evidence for A Panel of ECOWAS Countries," Economics Bulletin, AccessEcon, vol. 33(4), pages 2627-2633.
    3. Sethi, Narayan & Bhujabal, Padmaja & Sahoo, Malayaranjan & Sucharita, Sanhita, 2019. "Does Foreign Aid Act as an Instrument of Economic Growth in India and Sri Lanka?," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(2), pages 3-19.
    4. Irandoust, Manuchehr & Ericsson, Johan, 2005. "Foreign aid, domestic savings, and growth in LDCs: An application of likelihood-based panel cointegration," Economic Modelling, Elsevier, vol. 22(4), pages 616-627, July.
    5. Nejib Hachicha, 2003. "Capital Inflows-National Saving Dynamics in Tunisia: Evidence from Cointegration, Weak Exogeneity and Simultaneous Error Correction Modelling," International Economic Journal, Taylor & Francis Journals, vol. 17(4), pages 43-60.
    6. Obstfeld, Maurice, 1998. "Foreign Resource Inflows, Saving, and Growth," Center for International and Development Economics Research (CIDER) Working Papers 233618, University of California-Berkeley, Department of Economics.
    7. Ali, Sharafat & Ahmad, Najid, 2013. "A Time Series Analysis of Foreign Aid and Income Inequality in Pakistan," MPRA Paper 48877, University Library of Munich, Germany.
    8. Innocent .U. Duru & Bartholomew .O.N. Okafor & Millicent Adanne Eze & Gabriel .O. Ebenyi, 2020. "Foreign Aid and Economic Growth: Empirical Evidence from Nigeria," Growth, Asian Online Journal Publishing Group, vol. 7(1), pages 35-50.
    9. Abdulnasser Hatemi-J & Manuchehr Irandoust, 2005. "Foreign Aid And Economic Growth: New Evidence From Panel Cointegration," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(1), pages 71-80, June.
    10. Ramesh Durbarry, 2004. "Foreign aid: is it all consumed?," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(2), pages 189-199.
    11. Tadesse, Tasew, 2011. "Foreign aid and economic growth in Ethiopia," MPRA Paper 33953, University Library of Munich, Germany, revised 20 Sep 2011.
    12. Ulrich Lächler & Peter Nunnenkamp, 1987. "The effects of debt versus equity inflows on savings and growth in developing economies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 123(4), pages 631-650, December.
    13. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development.
    14. Pahlaj Moolio & Somphyvatanak Kong, 2016. "Foreign Aid and Economic Growth: Panel Cointegration Analysis for Cambodia, Lao PDR, Myanmar, and Vietnam," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 2(4), pages 417-428, October.
    15. Temple, Jonathan R.W., 2010. "Aid and Conditionality," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4415-4523, Elsevier.
    16. Delwar Hossain, 2014. "Differential Impacts of Foreign Capital and Remittance Inflows on Domestic Savings in the Developing Countries: A Dynamic Heterogeneous Panel Analysis," Departmental Working Papers 2014-07, The Australian National University, Arndt-Corden Department of Economics.
    17. Luke Okafor & Joanna Tyrowicz, 2010. "Saving less when there is more foreign lending? Foreign debt and savings in developing countries," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 13(3), pages 213-223.
    18. Jiang Hongli & Prince Asare Vitenu‐Sackey, 2023. "Assessment of the effectiveness of foreign aid on the development of Africa," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 79-92, January.
    19. Burke, Paul J. & Ahmadi-Esfahani, Fredoun Z., 2006. "Aid and growth: A study of South East Asia," Journal of Asian Economics, Elsevier, vol. 17(2), pages 350-362, April.
    20. Abdur Chowdhury & George Mavrotas, 2005. "FDI and Growth: a Causal Relationship," WIDER Working Paper Series RP2005-25, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Savings; Foreign capital; Granger no-causality; Pakistan.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F30 - International Economics - - International Finance - - - General
    • F35 - International Economics - - International Finance - - - Foreign Aid

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eaa:aeinde:v:13:y:2013:i:2_14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: M. Carmen Guisan (email available below). General contact details of provider: http://www.usc.es/economet/eaa.htm .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.