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The Savings-Growth Nexus in Malaysia: Evidence from Nonparametric Analysis

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  • Chor Foon Tang
  • Soo Y Chua

Abstract

This study re-examines the savings-growth nexus in Malaysia by using the nonparametric methodology. Using quarterly data from March 1991 to September 2006, the result of the Bierens (1997) nonparametric cointegration test shows that savings and economic growth are cointegrated. Moreover, the multiple rank F-test (Holmes and Hutton, 1990) indicates a bilateral causality between savings and economic growth. In this study, Dynamic OLS is adopted and the estimated result implies that savings and economic growth are positively related in the long run. This result highlights that policies which encourage savings should be implemented as the causality test shows that savings is an engine to economic growth through its impact on capital formation. Thus, high savings carry the meaning of ‘boosting economy’, rather than ‘freezing economy’.

Suggested Citation

  • Chor Foon Tang & Soo Y Chua, 2009. "The Savings-Growth Nexus in Malaysia: Evidence from Nonparametric Analysis," The IUP Journal of Financial Economics, IUP Publications, vol. 0(3 & 4), pages 83-94, September.
  • Handle: RePEc:icf:icfjfe:v:07:y:2009:i:3&4:p:83-94
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    Cited by:

    1. Tang, Chor Foon & Tan, Bee Wah, 2014. "A revalidation of the savings–growth nexus in Pakistan," Economic Modelling, Elsevier, vol. 36(C), pages 370-377.
    2. Mohamed Abdouli and Sami Hammami, 2017. "Exploring Links between FDI Inflows, Energy Consumption, and Economic Growth: Further Evidence from MENA Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(1), pages 95-117, March.
    3. Chor Foon Tang & Soo Y. Chua, 2012. "The savings-growth nexus for the Malaysian economy: a view through rolling sub-samples," Applied Economics, Taylor & Francis Journals, vol. 44(32), pages 4173-4185, November.
    4. Tang, Chor Foon, 2010. "Savings-led growth theories: A time series analysis for Malaysia using the bootstrapping and time-varying causality techniques," MPRA Paper 27299, University Library of Munich, Germany.

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