Determinants of private savings in Fiji: an empirical analysis using autoregressive distributed lag approach for the period 1970-2015

Abstract

This study examines the behaviour of private savings in Fiji for the period 1970-2015 using ARDL approach for selected determinants and with latest available data. The estimated results reveal that savings behaviour is explained by life cycle and permanent income hypothesis, with accumulated wealth, real interest rate, and political instability reflecting a positive and significant influence on private savings while dependency ratio, agricultural activities, domestic credit and real GDP per capita showing a negative but significant influence on private savings. Inflation was also included as an important savings determinant but the results reflected an insignificant impact on private savings. Based on the research, an important policy implication has been reached that government rational actions can help stimulate savings culture in the economy. The government needs to ensure a positive economic environment in the country through avoidance of political instabilities, bank collapses, establishment of better financial products, liberalisation policies and an extensive awareness program for the Fijians to learn the methodologies of savings for future.