On the Causality Between Saving and Growth: Long- and Short-Run Dynamics and Country Heterogeneity
The temporal interdependence between saving and output has been in focus in a number of recent empirical studies. Results from these studies have compelled some authors to question the traditional notion of a causal chain where saving leads growth through capital accumulation. This paper contributes to this literature. As opposed to the previous studies, which have mainly utilised panel-estimation methods, the tests of causal chains here are carried out in time-series settings. Saving and GDP are estimated in bivariate vector autoregressive or vector error-correction models for Sweden, UK, and USA, and tests of Granger non-causality are performed within the estimated systems. The main results show that the causal chains linking saving and output differ across countries, and also that causality associated with adjustments to long-run relations might go in different directions than causality associated with short-term disturbances.
|Date of creation:||15 Oct 1999|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
More information through EDIRC
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.:
- Masih, Rumi & Masih, Abul M. M., 1996. "Macroeconomic activity dynamics and Granger causality: New evidence from a small developing economy based on a vector error-correction modelling analysis," Economic Modelling, Elsevier, vol. 13(3), pages 407-426, July.
- Robert J. Barro & Paul Romer, 1993.
National Bureau of Economic Research, Inc, number barr93-1.
- Paxson, Christina, 1996.
"Saving and growth: Evidence from micro data,"
European Economic Review,
Elsevier, vol. 40(2), pages 255-288, February.
- Christopher D. Carroll & David N. Weil, 1993.
"Saving and Growth: A Reinterpretation,"
NBER Working Papers
4470, National Bureau of Economic Research, Inc.
- Carroll, Christopher D. & Weil, David N., 1994. "Saving and growth: a reinterpretation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 133-192, June.
- Lee, Kevin & Pesaran, M Hashem & Smith, Ron, 1997.
"Growth and Convergence in Multi-country Empirical Stochastic Solow Model,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 12(4), pages 357-92, July-Aug..
- Kevin Lee & M. Hashem Pesaran & Ron Smith, 1996. "Growth and Convergence in a Multi-Country Empirical Stochastic Solow Model," Working Papers 9637, Economic Research Forum, revised Dec 1996.
- Levine, Ross & Renelt, David, 1992.
"A Sensitivity Analysis of Cross-Country Growth Regressions,"
American Economic Review,
American Economic Association, vol. 82(4), pages 942-63, September.
- Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank.
- Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
- Blomström, Magnus & Lipsey, Robert E & Zejan, Mario, 1993.
"Is Fixed Investment the Key to Economic Growth?,"
CEPR Discussion Papers
870, C.E.P.R. Discussion Papers.
- 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 285-98, May.
- Zapata, Hector O. & Rambaldi, Alicia N., 1996. "Monte Carlo Evidence On Cointegration And Causation," Staff Papers 31690, Louisiana State University, Department of Agricultural Economics and Agribusiness.
- 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.
- Sala-i-Martin, Xavier, 1997.
"I Just Ran Two Million Regressions,"
American Economic Review,
American Economic Association, vol. 87(2), pages 178-83, May.
- Sergio T. Rebelo, 1990.
"Long Run Policy Analysis and Long Run Growth,"
NBER Working Papers
3325, National Bureau of Economic Research, Inc.
- Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
- Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1991.
"Stochastic trends and economic fluctuations,"
Working Paper Series, Macroeconomic Issues
91-4, Federal Reserve Bank of Chicago.
- Vanhoudt, Patrick, 1998.
"A fallacy in causality research on growth and capital accumulation,"
Elsevier, vol. 60(1), pages 77-81, July.
- VANHOUDT, Patrick, 1997. "A fallacy in causality research on growth and capital accumulation," SESO Working Papers 1997008, University of Antwerp, Faculty of Applied Economics.
- Jacobson Tor & Lindh Thomas & Warne Anders, 2002.
"Growth, Saving, Financial Markets, and Markov Switching Regimes,"
Studies in Nonlinear Dynamics & Econometrics,
De Gruyter, vol. 5(4), pages 1-20, January.
- Jacobson, Tor & Lindh, Thomas & Warne, Anders, 1998. "Growth, Savings, Financial Markets and Markov Switching Regimes," Working Paper Series 69, Sveriges Riksbank (Central Bank of Sweden).
- Francis In & Chris Doucouliagos, 1997. "Human capital formation and US economic growth: a causality analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 4(5), pages 329-331.
- Blundell, Richard & Browning, Martin & Meghir, Costas, 1994.
"Consumer Demand and the Life-Cycle Allocation of Household Expenditures,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(1), pages 57-80, January.
- Richard Blundell & Martin Browning & Costas Meghir, 1993. "Consumer demand and the life-cycle allocation of household expenditures," IFS Working Papers W93/11, Institute for Fiscal Studies.
- King, Robert G. & Levine, Ross, 1994.
"Capital fundamentalism, economic development, and economic growth,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 40(1), pages 259-292, June.
- King, Robert G. & Levine, Ross & DEC, 1994. "Capital fundamentalism, economic development, and economic growth," Policy Research Working Paper Series 1285, The World Bank.
- Modigliani, Franco, 1986.
"Life Cycle, Individual Thrift, and the Wealth of Nations,"
American Economic Review,
American Economic Association, vol. 76(3), pages 297-313, June.
- Modigliani, Franco, 1985. "Life Cycle, Individual Thrift and the Wealth of Nations," Nobel Prize in Economics documents 1985-1, Nobel Prize Committee.
- Peter C.B. Phillips, 1993.
"Fully Modified Least Squares and Vector Autoregression,"
Cowles Foundation Discussion Papers
1047, Cowles Foundation for Research in Economics, Yale University.
- Phillips, Peter C B, 1995. "Fully Modified Least Squares and Vector Autoregression," Econometrica, Econometric Society, vol. 63(5), pages 1023-78, September.
- Klaus NEUSSER, 1990.
"Testing the Long-Run Implications of the Neoclassical Growth Model,"
Vienna Economics Papers
vie9002, University of Vienna, Department of Economics.
- Neusser, Klaus, 1991. "Testing the long-run implications of the neoclassical growth model," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 3-37, February.
- John Y. Campbell, 1986.
"Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis,"
NBER Working Papers
1805, National Bureau of Economic Research, Inc.
- Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-73, November.
- Zellner, A., 1988.
"Causality And Causal Laws In Economics,"
m8801, Southern California - Department of Economics.
- Hakkio, Craig S. & Rush, Mark, 1991.
"Cointegration: how short is the long run?,"
Journal of International Money and Finance,
Elsevier, vol. 10(4), pages 571-581, December.
- Pesaran, M. H. & Smith, Ron P., 1998. "Structural Analysis of Cointegrating VARs," Cambridge Working Papers in Economics 9811, Faculty of Economics, University of Cambridge.
- Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
- Deaton, A., 1997. "Saving and Growth," Papers 180, Princeton, Woodrow Wilson School - Development Studies.
- Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September.
- Orazio Attanasio, 1997. "Consumption and saving behaviour: modelling recent trends," Fiscal Studies, Institute for Fiscal Studies, vol. 18(1), pages 23-47, February.
- M. Hashem Pesaran & Ron P. Smith, 1998. "Structural Analysis of Cointegrating VARs," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 471-505, December.
- Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, June.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Toda, Hiro Y & Phillips, Peter C B, 1993.
"Vector Autoregressions and Causality,"
Econometric Society, vol. 61(6), pages 1367-93, November.
- Sinha, Dipendra & Sinha, Tapen, 1998. "Cart before the horse? The saving-growth nexus in Mexico," Economics Letters, Elsevier, vol. 61(1), pages 43-47, October.
When requesting a correction, please mention this item's handle: RePEc:hhs:uunewp:1999_018. 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: (Katarina Grönvall)
If references are entirely missing, you can add them using this form.