IDEAS home Printed from
   My bibliography  Save this paper

Does The Keynesian Absolute Income Hypothesis Exist in Pakistan?


  • Shahbaz, Muhammad
  • Nawaz, Kishwer
  • AROURI, Mohamed El Hedi
  • Teulon, Frédéric


The present paper contributes in existing economic literature by investigating the validation of the Keynesian Absolute Income hypothesis in Pakistan by applying the ARDL approach to cointegration. The findings of this paper indicate the validation of the Keynesian absolute income hypothesis in Pakistan, where public savings and financial development add in private savings. This study opens up new insights for government to improve the level of private savings.

Suggested Citation

  • Shahbaz, Muhammad & Nawaz, Kishwer & AROURI, Mohamed El Hedi & Teulon, Frédéric, 2013. "Does The Keynesian Absolute Income Hypothesis Exist in Pakistan?," MPRA Paper 47923, University Library of Munich, Germany, revised 01 Jul 2013.
  • Handle: RePEc:pra:mprapa:47923

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. Muhammad Shahbaz & Muhammad Shahbaz Shabbir & Muhammad Sabihuddin Butt, 2013. "Effect of financial development on agricultural growth in Pakistan: New extensions from bounds test to level relationships and Granger causality tests," International Journal of Social Economics, Emerald Group Publishing, vol. 40(8), pages 707-728, June.
    2. Gupta, K L, 1970. "Foreign Capital and Domestic Savings: A Test of Haavelmo's Hypothesis with Cross-Country Data: A Comment," The Review of Economics and Statistics, MIT Press, vol. 52(2), pages 214-216, May.
    3. Bayoumi, Tamim A, 1993. "Financial Deregulation and Consumption in the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 536-539, August.
    4. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    5. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-348, August.
    6. Athukorala, Prema-chandra & Sen, Kunal, 2004. "The Determinants of Private Saving in India," World Development, Elsevier, vol. 32(3), pages 491-503, March.
    7. Corbo, Vittorio & Schmidt-Hebbel, Klaus, 1991. "Public policies and saving in developing countries," Journal of Development Economics, Elsevier, vol. 36(1), pages 89-115, July.
    8. 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.
    9. 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.
    10. Caporale, Guglielmo Maria & Williams, Geoffrey, 2001. "Monetary Policy and Financial Liberalization: The Case of United Kingdom Consumption," Journal of Macroeconomics, Elsevier, vol. 23(2), pages 177-197, April.
    11. Muhammad Shahbaz & Nadeem Ahmad & Abu Wahid, 2010. "Savings–Investment Correlation and Capital Outflow: The Case of Pakistan," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 17(1), pages 80-97, May.
    12. Koskela, Erkki & Viren, Matti, 1982. "Saving and inflation : Some international evidence," Economics Letters, Elsevier, vol. 9(4), pages 337-344.
    13. Norman Loayza & Rashmi Shankar, 2000. "Private Saving in India," World Bank Economic Review, World Bank Group, vol. 14(3), pages 571-594, September.
    14. Stephen K. Layson, 1983. "Homicide and Deterrence: Another View of the Canadian Time-Series Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 52-73, February.
    15. 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.
    16. Ismail, Aisha & Rashid, Kashif, 2013. "Determinants of household saving: Cointegrated evidence from Pakistan (1975–2011)," Economic Modelling, Elsevier, vol. 32(C), pages 524-531.
    17. Kivilcim Metin Ozcan & Asli Gunay & Seda Ertac, 2003. "Determinants of private savings behaviour in Turkey," Applied Economics, Taylor & Francis Journals, vol. 35(12), pages 1405-1416.
    18. DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, vol. 60(2), pages 423-433, March.
    19. Norman Loayza & Klaus Schmidt-Hebbel & Luis Servén, 2000. "What Drives Private Saving Across the World?," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 165-181, May.
    20. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    21. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    22. Yaya Keho, 2011. "Long‐Run Determinants Of Savings Rates In Waemu Countries: An Empirical Assessment From Ardl Bounds Testing Approach," South African Journal of Economics, Economic Society of South Africa, vol. 79(3), pages 312-329, September.
    23. Leff, Nathaniel H, 1969. "Dependency Rates and Savings Rates," American Economic Review, American Economic Association, vol. 59(5), pages 886-896, December.
    24. Ehrlich, Isaac, 1975. "The Deterrent Effect of Capital Punishment: A Question of Life and Death," American Economic Review, American Economic Association, vol. 65(3), pages 397-417, June.
    25. Giovannini, Alberto, 1983. "The interest elasticity of savings in developing countries: The existing evidence," World Development, Elsevier, vol. 11(7), pages 601-607, July.
    26. Cameron, Samuel, 1994. "A review of the econometric evidence on the effects of capital punishment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 23(1-2), pages 197-214.
    27. Lee, Joong-Koon, 1971. "Exports and the Propensity to Save in L.D.C.s," Economic Journal, Royal Economic Society, vol. 81(322), pages 341-351, June.
    28. Ehrlich, Isaac, 1977. "The Deterrent Effect of Capital Punishment: Reply," American Economic Review, American Economic Association, vol. 67(3), pages 452-458, June.
    29. Aasim M. Husain, 1996. "Private Saving and Its Determinants: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 35(1), pages 49-70.
    30. Paresh Kumar Narayan & Russell Smyth, 2005. "Temporal causality and the dynamics of democracy, emigration and real income in Fiji," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(2), pages 245-261.
    31. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
    32. Juthathip Jongwanich, 2010. "The determinants of household and private savings in Thailand," Applied Economics, Taylor & Francis Journals, vol. 42(8), pages 965-976.
    33. Hansen, Bruce E, 1996. "Erratum: The Likelihood Ratio Test under Nonstandard Conditions: Testing the Markov Switching Model of GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(2), pages 195-198, March-Apr.
    34. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, January.
    35. Christian Thimann & Anuradha Dayal-Gulati, 1997. "Saving in Southeast Asia and Latin America Compared; Searching for Policy Lessons," IMF Working Papers 97/110, International Monetary Fund.
    36. Ouliaris, Sam, 1981. "Household Saving and the Rate of Interest," The Economic Record, The Economic Society of Australia, vol. 57(158), pages 205-214, September.
    37. Masson, Paul R & Bayoumi, Tamim & Samiei, Hossein, 1998. "International Evidence on the Determinants of Private Saving," World Bank Economic Review, World Bank Group, vol. 12(3), pages 483-501, September.
    38. 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.
    39. Gulnur MURADOGLU & Fatma TASKIN, 1996. "Differences In Household Savings Behavior: Evidence From Industrial And Developing Countries," The Developing Economies, Institute of Developing Economies, vol. 34(2), pages 138-153, June.
    40. Isaac Ehrlich, 1996. "Crime, Punishment, and the Market for Offenses," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 43-67, Winter.
    41. Leff, Nathaniel H, 1971. "Dependency Rates and Savings Rates: Reply," American Economic Review, American Economic Association, vol. 61(3), pages 476-480, June.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Private savings; Co-integration; Pakistan;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:47923. 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: (Joachim Winter). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.