IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Does domestic saving cause economic growth? A time-series evidence from India

  • Singh, Tarlok
Registered author(s):

    This study examines the long-run effects of domestic saving on income and tests the null of non-causality between saving and growth in India. The optimal single-equation and the maximum-likelihood system estimates of the model consistently support the predictions of the neoclassical exogenous and the post-neoclassical endogenous models of economic growth, and suggest the significant long-run effects of saving on income. The innovation accounting shows the bidirectional causality between saving and growth. The stylized evidence for the steady-state effects of saving on income suggests the need to accelerate domestic saving to finance capital accumulation and foster higher income and growth. Most of the saving comes from the surplus household sector, and the deficit private corporate and public sectors draw on household saving to meet their investment requirements and finance the resource gaps. A two-pronged approach with the incentive-based measures to induce the motivation to save and the productivity-based measures to increase income and strengthen the capacity to save, would be useful to generate higher saving and reinforce the acceleration of income and growth.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/B6V82-4X9FGN3-1/2/a574b5d737fa3ae7b0a212cdd83913e4
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Journal of Policy Modeling.

    Volume (Year): 32 (2010)
    Issue (Month): 2 (March)
    Pages: 231-253

    as
    in new window

    Handle: RePEc:eee:jpolmo:v:32:y::i:2:p:231-253
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January.
    2. 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.
    3. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
    4. Sawa, Takamitsu, 1978. "Information Criteria for Discriminating among Alternative Regression Models," Econometrica, Econometric Society, vol. 46(6), pages 1273-91, November.
    5. Hao, K. & Inder, B., 1994. "A Diagnostic Test for Structural Change in Cointegrated Regression Models," Monash Econometrics and Business Statistics Working Papers 19/94, Monash University, Department of Econometrics and Business Statistics.
    6. Soren Johansen, 2002. "A Small Sample Correction for the Test of Cointegrating Rank in the Vector Autoregressive Model," Econometrica, Econometric Society, vol. 70(5), pages 1929-1961, September.
    7. Taylor, John B., 2008. "A review of the productivity resurgence," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 619-626.
    8. Deaton, A., 1989. "Saving And Liquidity Constraints," Papers 153, Princeton, Woodrow Wilson School - Public and International Affairs.
    9. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
    10. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
    11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    12. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    13. Feldstein, Martin, 2007. "Why is the Dollar So High?," Scholarly Articles 2794833, Harvard University Department of Economics.
    14. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, December.
    15. Loayza, N. & Schmidt, K. & Serven, L., 1999. "What Drives Private Saving Across the World?," Papers 47, Cambridge - Risk, Information & Quantity Signals.
    16. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 99-125, January.
    17. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    18. Mankiw, N. Gregory, 2006. "Reflections on the trade deficit and fiscal policy," Journal of Policy Modeling, Elsevier, vol. 28(6), pages 679-682, September.
    19. Schmidt-Hebbel, Klaus & Serven, Luis & Solimano, Andres, 1996. "Saving and Investment: Paradigms, Puzzles, Policies," World Bank Research Observer, World Bank Group, vol. 11(1), pages 87-117, February.
    20. Phillips, Peter C B & Loretan, Mico, 1991. "Estimating Long-run Economic Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 407-36, May.
    21. Robert J. Barro, 1988. "The Ricardian Approach to Budget Deficits," Working Papers 728, Queen's University, Department of Economics.
    22. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
    23. Xiao, Zhijie & Phillips, Peter C. B., 2002. "A CUSUM test for cointegration using regression residuals," Journal of Econometrics, Elsevier, vol. 108(1), pages 43-61, May.
    24. Ploberger, Werner & Kramer, Walter, 1992. "The CUSUM Test with OLS Residuals," Econometrica, Econometric Society, vol. 60(2), pages 271-85, March.
    25. Xiao, Zhijie, 1999. "A residual based test for the null hypothesis of cointegration," Economics Letters, Elsevier, vol. 64(2), pages 133-141, August.
    26. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
    27. Bernheim, B Douglas, 1989. "A Neoclassical Perspective on Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 55-72, Spring.
    28. Schwert, G William, 1989. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(2), pages 147-59, April.
    29. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, March.
    30. 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.
    31. Peter C.B. Phillips, 1988. "Optimal Inference in Cointegrated Systems," Cowles Foundation Discussion Papers 866R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1989.
    32. Sarno, Lucio & Taylor, Mark P, 1998. "Savings-Investment Correlations: Transitory versus Permanent," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(0), pages 17-38, Supplemen.
    33. Christopher D. Carroll & David N. Weil, 1993. "Saving and growth: a reinterpretation," Working Paper Series / Economic Activity Section 140, Board of Governors of the Federal Reserve System (U.S.).
    34. Christopher D. Carroll & Jody Overland & David N. Weil, 1995. "Saving and growth with habit formation," Finance and Economics Discussion Series 95-42, Board of Governors of the Federal Reserve System (U.S.).
    35. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
    36. Christopher D Carroll, 1990. "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis," Economics Working Paper Archive 371, The Johns Hopkins University,Department of Economics, revised Aug 1996.
    37. 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.
    38. Elliott, Graham, 1999. "Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-83, August.
    39. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    40. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
    41. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    42. Johansen, S ren, 2000. "A Bartlett Correction Factor For Tests On The Cointegrating Relations," Econometric Theory, Cambridge University Press, vol. 16(05), pages 740-778, October.
    43. Stock, James H. & Watson, Mark W., 1989. "Interpreting the evidence on money-income causality," Journal of Econometrics, Elsevier, vol. 40(1), pages 161-181, January.
    44. Feldstein, Martin, 2007. "Why is the dollar so high?," Journal of Policy Modeling, Elsevier, vol. 29(5), pages 661-667.
    45. Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
    46. 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.
    47. Saikkonen, Pentti, 1991. "Asymptotically Efficient Estimation of Cointegration Regressions," Econometric Theory, Cambridge University Press, vol. 7(01), pages 1-21, March.
    48. Dani Rodrik, 2000. "Saving Transitions," World Bank Economic Review, World Bank Group, vol. 14(3), pages 481-507, September.
    49. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    50. Inder, Brett, 1993. "Estimating long-run relationships in economics : A comparison of different approaches," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 53-68.
    51. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    52. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    53. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    54. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:jpolmo:v:32:y::i:2:p:231-253. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.