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Saving and Growth: Granger Causality Analysis with Bootstrapping on Panels of Countries

  • László Kónya


    (Department of Economics and Finance, La Trobe University)

This paper investigates the possibility of Granger causality between the saving ratio (the proportion of gross domestic saving in GDP) and the growth rate (annual percentage change of real per capita GDP) in eighty-four countries of the world from 1961 to 2000. For technical reason, on the basis of their per capita GDP in 1995, the countries have been classified as high-income (at least 10000 $US), medium-income (between 1000 and 10000 $US) and low- income (less than 1000 $US) countries, and the three panels of twenty-six, thirty and twenty- eight countries, respectively, are considered separately. Granger causality is tested for with a new panel-data approach based on SUR systems and Wald tests with country specific bootstrap critical values. The results indicate two-way Granger causality between the saving ratio and the growth rate in Austria, one-way causality from saving to growth in Ireland, Trinidad & Tobago and the Central African Republic, and one-way causality from growth to saving in Finland, France, Japan, Sweden, Switzerland and Niger. There is also some support to causality from saving to growth in Mauritania and from growth to saving in Saudi Arabia, but in all other cases there is no empirical evidence of Granger causality in either direction.

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Paper provided by School of Economics, La Trobe University in its series Working Papers with number 2004.02.

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Length: 40 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:ltr:wpaper:2004.02
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  1. Palumbo, Antonella, 1996. "Notes on Investment, Saving and Growth," Contributions to Political Economy, Oxford University Press, vol. 15(0), pages 105-15.
  2. Vanhoudt, Patrick, 1998. "A fallacy in causality research on growth and capital accumulation," Economics Letters, Elsevier, vol. 60(1), pages 77-81, July.
  3. 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.).
  4. 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.
  5. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
  6. 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.
  7. 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.
  8. Breuer, Janice Boucher & McNown, Robert & Wallace, Myles, 2002. " Series-Specific Unit Root Tests with Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(5), pages 527-46, December.
  9. Edwards, Sebastian, 1996. "Why are Latin America's savings rates so low? An international comparative analysis," Journal of Development Economics, Elsevier, vol. 51(1), pages 5-44, October.
  10. 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.
  11. Iris Claus & David Haugh & Grant Scobie & Jonas Tornquist, 2001. "Saving and growth in an open economy," Treasury Working Paper Series 01/32, New Zealand Treasury.
  12. 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.
  13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  14. 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.
  15. Holmes, Mark J, 2003. "Are the Trade Deficits of Less Developed Countries Stationary?. Evidence for African Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 3(3).
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