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Saving, Investment and Growth in India: Evidence from Cointegration and Causality Tests

Author

Listed:
  • Inder Sekhar Yadav

    (Indian Institute of Technology, Kharagpur, India)

  • Phanindra Goyari

    (School of Economics, University of Hyderabad, India)

  • R. K. Mishra

    (Institute of Public Enterprise, Osmania University Campus, Hyderebad, India)

Abstract

This study examines the long-run equilibrium relationship between real domestic saving, investment and growth and tests the null hypothesis of non-causality between these variables in India during 1951-2015. The cointegration tests confirmed the existence of a long-run equilibrium relationship between domestic savings, investment and growth for India. The estimated long-run elasticities suggested a stronger elasticity of saving in explaining the investment in India than growth. The ARDL short-run estimates were consistent with long-run estimates. The causality test suggested the absence of causal relationship between growth and investment, and between growth and saving. However, a unidirectional causality from saving to investment was confirmed suggesting that domestic savings play a very important role in supporting national investments.

Suggested Citation

  • Inder Sekhar Yadav & Phanindra Goyari & R. K. Mishra, 2018. "Saving, Investment and Growth in India: Evidence from Cointegration and Causality Tests," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 55-68, March.
    • Handle: RePEc:nwe:eajour:y:2018:i:1:p:55-68
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    References listed on IDEAS

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    More about this item

    Keywords

    cointegration; Growth; Saving; Investment; Causality; DOLS; FMOLS; CUSUM;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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