Empirical analysis of savings and investments relation in Turkey: cointegration test with structural breaks approach

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Purpose- The main aims of the economic growth policies implemented by governments are to reach high and sustainable economic growth rates. In this regard, to define the relation between economic growth and national savings is quite impotant. Savings are very important in terms of economic growth that makes it an important issue in order to achieve economy policy targets. Methodology- In this study, the relation between savings rates and investment rates will be investigated in the context of Feldstein – Horioka (1980) puzzle for the Turkish economy for the period from 1980 to 2015. Findings- Empirical findings show that variables have unit roots. Results obtained from Bai – Perron (2003) co-integration test which taking structural breaks into considiration show that there is a structural break in 1999 and the time span is taken into two sub-period. According to test results, the investigated relation between investments and savings is weak in the first period (1980 – 1998), while it is stronger in the second period starts from 1999 till 2015. Conclusion - Investment rates are above the savings rates in the entire analysis period. This situation reveals as one of the main reason of current account deficit in Turkish economy.