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

(ProQuest: ... denotes formulae omitted.)1. INTRODUCTIONThe role of saving in the growth process has long been recognized. Saving creates capital formation which is a catalyst in the growth process. For instance, the Solow-Growth model predicts that a rise in saving rate and productivity improvement are associated with an increase in per capita income. Indeed, one of the explanations to the dismal growth performance in Sub-Saharan Africa, particularly in 90s, was the low saving and investment rates (Shawa et al., 2012). The positive link between saving and growth is also empirical. Estimated growth functions have established positive significant saving coefficients. In this direction World Bank (1993) established that countries with higher saving rates grew at a faster rate than those with low saving rates. Despite the recognised role that saving rates play in explaining economic growth, empirical evidence is less clear about the drivers of saving, particular private saving in Sub-Saharan Africa.The objective of this paper therefore is to empirically estimate a dynamic model of private saving for 39 Sub-Saharan African countries and examine the main drivers of private saving. The present work adds distinct value to earlier work on saving behaviour. First, estimating a private saving function recognises the role the private sector plays in the growth process, which is mostly ignored in economic analyses. Secondly, past work on saving has concentrated on testing the prediction of a single theory. Recognising that no single theory can fully explain private saving behaviour, we employ an encompassing model to allow a variety of potential determinants. Thirdly, instead of using a diverse group of developing countries that combine Sub-Saharan African countries with other Less Developed countries, we estimate a private saving function for only Sub-Saharan African countries to capture the region's unique characteristics. Some past empirical works have found marked differences in results of Sub-Saharan African panels and other LDC panels (Mwega, 1997). Finally, considering that static panels neglect the lagged variable effects of the left-hand side variable, the paper uses dynamic panels to take full account of the persistent nature of the private saving rate.The rest of the paper is organized as follows: Section 2 gives some brief trends, Section 3 surveys the literature, and Section 4 presents the methodology. Results are discussed in Section 5, and Section 6 concludes the paper.2. BRIEF TRENDS IN SAVING, INVESTMENT, GDP GROWTH AND CURRENT ACCOUNT BALANCESaving rates have generally trailed investment rates in Sub-Saharan Africa. Huge gaps existed in the 1980 and 1990s. Measured as a per cent of GDP, Gross National Savings averaged only 14.9 compared to 23 per cent of investment in the 1980 decade (Table 1). The gap widened further in the 1990 decade with Gross National Savings accounting for only 14 per cent of GDP compared to 23.5 per cent of investment. Good progress was made in the 2000s where Gross National Saving Rates increased and converged towards investment rates. The unpalatable implication of the savinginvestment gap is the dependence on foreign capital for development.Perhaps confirming the results of World Bank (1993), it can be observed that decades of low saving rates are associated with low GDP growth rates in Sub-Saharan Africa and decades of high saving rates are associated with higher income growth (Table 1). GDP grew at below 3 per cent between 1980 and 1999, decades of relatively low Gross Saving Rates. In the 2000s, on the other hand, increases in Gross National Saving rates at 19.5 per cent (2000-2009) and 21.4 per cent (2010-2015) were associated with higher income growth rates at 5.8 per cent and 5.0 per cent, respectively.When yearly observations are taken into account (Figure 1) the saving-investment gap is further demonstrated. It is shown that for all the years between 1980 and 2000, Investment was constantly higher than Gross National Saving with 1989 registering the highest gap (23 per cent). …

The paper is aimed at the evaluation of a relationship between the rate of investments and the rate of savings in selected Central European countries. A reference period for the analysis is 1995–2009. In all analysed Central European countries, the rate of investments permanently exceeded (but exceptions) the rate of savings in the period under investigation. Through fitting the development series of a calculated indicator as a difference of the rate of investments and the rate of savings in monitored countries by a polynomial of the second degree it was possible to compare developmental trends of this indicator in particular countries involved in this analysis. Polynomial trends of the difference indicator of the rate of investments and the rate of savings in Central European countries in the monitored period indicate similar developmental tendencies characterized (at the beginning of the reference period) by increasing the imbalance of the rate of investments and the rate of savings (on average until about 2003) and then by follow-up tendencies towards the gradual return to the balance. For the purpose of comparison, a difference was also monitored between the rate of investments and the rate of savings in EU15 countries as a whole, which permanently fluctuated around zero. The mean value of this indicator amounted to 0.11% for the period 1995–2009. Thus, in EU15 countries, the rate of investments roughly corresponded to the rate of savings (on a long-term basis). Based on this analysis, it follows that there is a correlation between the rate of investments and the rate of savings. Calculated parameters of particular regression functions are presented as Results in this paper. Indices of correlation and types of a regression function were calculated for particular countries. For the Czech Republic, these results are statistically highly significant using all three types of regression functions. In Poland, they can be indicated as statistically significant using the polynomial of the second and third degrees similarly as in Slovakia. In Hungary, already the use of a polynomial of the first degree results in statistically significant results. Using a polynomial of the third degree gives statistically highly significant results. The intertemporal analysis of investments and savings presented in this paper can be also used and developed as part of the problem of an intertemporal approach to the balance of payments.

It can be observed from the existing energy literature the previous papers investigating the influence of renewables consumption on GDP for the USA commonly ignore structural breaks in the US economy. Hence, the purpose of this paper is to examine the impact of renewable energy consumption on economic growth for the USA using quarterly data over the period 1977Q1-2019Q3 through unit root and cointegration methods based on different approaches in modelling structural breaks. Our empirical evidence confirms that all unit root tests give similar outputs and show all the variables become stationary at 1st differences. Besides, cointegration tests show highly different results in terms of the statistical significance of the coefficients. For instance, the cointegration test without structural breaks indicates that renewable energy consumption has no impact on economic growth. With sharp structural breaks in the cointegration approach, there is no cointegration between the variables. The empirical findings of the cointegration test with sharp and gradual breaks imply that renewable energy consumption has positive effects on economic growth. This paper discusses the implications of the empirical findings.

How important is a high rate of savings to rapid economic growth and how does rapid economic growth affect efforts to raise the rate of savings? These are highly important issues to a debtor company trying to reduce its foreign debt. Study has shown that a higher national savings rate is an important macroeconomic goal in the developing world. Using the models of Japan and the U.S. it is apparent how a higher national rate of savings and investment leads to greater economic growth. Reduced fertility and a slowed population growth have lead to higher rates of saving. Surveys from industrialized countries and both Latin American and Asian countries indicate that when there are fewer children in a household there is less consumption and more savings. However slower population growth may have a reverse effect in other countries. 2 other studies have shown that households with fewer children have higher rates of consumption. This is most likely to occur in countries where there is slow or non-existent economic growth. The relationship between the number of children in a household and the impact on savings needs to be fully explored and tested. In addition the relationship between demographic factors and savings in developing countries is dependent upon the development of better models and the retrieval of improved data. A final conclusion observes that successful family planning can lead to an increase in family savings.

Asymmetric linkage between copper-cobalt productions and economic growth: Evidence from Republic Democratic of Congo

Currently, digital economies, or digitalisation, are progressively infiltrating all facets of economies, from production to consumption. Consequently, alongside the impact of digitisation on economic growth, its influence on carbon emissions is also of interest. Digitalisation positively impacts economic growth while concurrently decreasing carbon emissions. Nonetheless, some contend that digitisation will elevate carbon emissions due to increased energy use. The literature does not achieve consensus regarding the effects of digitalisation on carbon emissions and economic growth. This study examines the impact of digital economies on carbon emissions and economic growth within the Turkish economy from 1996 to 2021. The research employs the ratio of internet users to the total population as an indication of the digital economy. In addition to carbon emissions and economic growth indicators, we utilise data on energy structure, government expenditures, urbanisation, and openness to foreign trade as control variables. The ADF unit root test with structural break is employed to ascertain the presence of both unit root and structural break in the study's data. We opted to employ the FA-ARDL approach, incorporating Fourier terms, to ascertain the long-term relationship among the variables. The study's findings indicate that digitisation positively influences economic growth while adversely affecting carbon emissions.

real GDP) by using annual time series data for the Turkish economy over the period 1950-2006. Thestudy applies a number of econometric techniques: ADF unit root test, Johansen cointegration test, vectorerror correction model (VECM), and Granger causality test.The results of this dissertation show that all the variables are stationary in the first difference. Moreover,the Johansen cointegration test confirms the existence of the long run relationship among the twovariables. The Granger test shows one way causality from economic growth to real net exports. Thecausality results are consistent with the results reported by the Vector Error Correction Model (VECM).There is a long run and also short run causality relationship between the real export and the economicgrowth. The direction of this causality is from economic growth (real GDP) to real export.

The Keynesian macroeconomic model implies that household expenditures and savings have significant long-run impacts on economic growth by affecting total expenditures. Therefore, policymakers should determine and apply appropriate policies to maintain these variables. For this purpose, the long-run relationship of economic growth with consumption, unemployment and saving rates in Vietnam is analyzed with the time data method using annual data for the period 1996-2017. Consumption appears to have the most impact on economic growth in accordance with the estimation results of a co-integration test from an autoregressive distributed lag model (ARDL model). In long run, an increase of 1% in consumption expenditures decreases economic growth by 0.41%. A 1% increase in saving rates increases economic growth by 0.0009%. While an increase of 1% in unemployment rates decreases economic growth by 0.043%. Our results demonstrate that there exists only long run relationship among economic growth, consumption, saving and unemployment rates for Vietnam, but not in short run.

This study differs from other studies with the research of the energy density of Turkey, which imports more than half of its energy demand. While GDP per capita in Turkey increased by 347% in 2019 compared to 1968, energy consumption per capita increased by 324% in parallel with this. In other words, efficient use of energy in Turkey continues to be a big problem despite technological developments. Therefore, it is considered important to reduce energy intensity in Turkey, which is dependent on foreign energy. In this study, the relationship between GDP per capita, industrialization and energy prices, and energy intensity in the 1968-2019 period in the Turkish economy is investigated. The unit root process was determined by Perron (1989) and Zivot and Andrews (1992) tests, which allow structural breaks as an empirical method, and Gregory and Hansen (1996), a structural break cointegration test, was used. Empirical findings have shown that there is a long-term relationship between the variables. The Fully Modified Least Squares Method (FMOLS) estimator was used as the cointegration estimator. According to the cointegration estimation results, the increase in economic growth and energy price increases reduces energy intensity. However, higher industrialization leads to more intensive use of energy.

This study is to examine the relationship between information and communication technology (ICT) and financial development in the Turkish economy during the period of 1986–2018. By empirical literature, economic growth, technological innovation, and financial globalization are added to the financial development model as explanatory variables. The autoregressive distributed lag (ARDL) model and Hatemi-J cointegration test with two structural breaks are applied to examine the presence of cointegration between the variables. Dynamic ordinary least squares (DOLS), fully modified least squares (FMOLS), and canonical cointegrating regression (CCR) estimation techniques are applied for long-term estimates. The vector error correction model (VECM) Granger causality approach is used for causality analysis. Our empirical results show that under the structural break, ICT, economic growth, technological innovation, and financial globalization are cointegrated with financial development. In the presence of a structural break, ICT and technological innovation negatively affect financial development, while economic growth and financial globalization have a positive impact on financial development. The causality analysis determines that there is a one-way causality relationship running from ICT and economic growth to financial development. In addition, technological innovation and financial globalization lead to long-term financial development. Empirical findings have important policy recommendations for financial development in the Turkish economy.

This study examined the various sources of public funds and their resultant effect on economic growth in Nigeria from 1986-2014. The sources of public funds considered in this study were tax revenue, oil revenue, external debt and national savings. Two models were used in this study; one analyzed the effect of these individual sources of public funds on economic growth, while the other model explained the effect of aggregate government revenue on economic growth. The times series data sourced from Central Bank of Nigeria Statistical Bulletin were analyzed using unit root tests, cointegration tests and vector error correction mechanism (VECM). The unit root test revealed that all the variables were stationary at first difference except tax revenue which was significant at level. The cointegration tests (both Johansen and Engle-Granger) showed that a long run relationship existed between the individual sources of public funds and economic growth, as well as aggregate government revenue and economic growth. The results obtained for model one revealed that tax revenue and oil revenue had a positive effect on economic growth, while national savings and external debt exerted a negative effect on economic growth. With respect to total government revenue, economic growth depleted as a result of changes in total government revenue. Finally, it was recommended among other things that government should fulfil her obligations of social and economic welfare to her citizens, so that anyone who enjoys such services will be conscious of tax payment in Nigeria.

PurposeThe effect of foreign direct investment (FDI) on economic growth is widely believed to be contingent on the development of the financial sector. Nevertheless, as the possibility that the effect of financial development on growth being contingent on FDI has been neglected in existing literature, the authors have investigated it in this paper. In general, the purpose of this paper is to examine the effect of financial development and FDI on economic growth in Sudan using annual data from 1970 to 2014.Design/methodology/approachSince most of the macroeconomic variables are subject to unit root problem, the time series data are assessed using unit root and cointegration tests with/without structural break. Moreover, the study uses the fully modified ordinary least squares and the dynamic ordinary least squares techniques to estimate the long-run model.FindingsThe results of the cointegration tests provide evidence that a long-run relationship exists among variables even after accounting for the structural break. The results show that financial development and FDI are positive and significant in explaining economic growth in Sudan. Financial development is found to be more beneficial to economic growth than FDI. Moreover, the findings reveal that FDI leads to better economic performance through financial development. Interestingly, the findings of the study show that the effect of financial development on economic growth is further enhanced by the inflows of FDI.Research limitations/implicationsThe government should focus on promoting FDI in more productive sectors. In addition, further cooperation with multinational enterprises is needed to increase FDI in the country.Originality/valueThis is the first paper that empirically examines both the interlinked impact of FDI on growth through financial development and the impact of financial development on economic growth through FDI in Sudan using appropriate econometric methods.

This study examines the causal relationship between electricity consumption and economic growth for Ghana during the period 1970 to 2010. The study employed unit root and cointegration tests taking into account structural breaks. The following findings were made: First, a plot of the series indicated a trend pattern. The series also experienced structural breaks in 1979 and 1983 but after taking structural breaks into account they became stationary. Second, the series exhibited one cointegration vector implying a long–run relationship between them. Third, the results revealed the presence of unidirectional Granger causality running from economic growth to electricity consumption. In general, the study identified the presence of structural break dates which corresponded with the critical economic events in Ghana. Key words: Electricity consumption, economic growth, structural break, vector error correction mode (VECM), causality.

The relationship between savings rate and the rate of investments in an economy has been studied under the Feldstein-Horioka hypothesis to detect whether a higher domestic saving rate in a country is correlated with a higher rate of domestic investment. In the case of Nigeria, these rates have been exhibiting a declining trend over the years. As such, this paper was geared towards ascertaining whether the Feldstein-Horioka hypothesis could be valid in Nigeria with a consideration of the influence of foreign direct investment (FDI). The study utilized data from 1981 to 2020 which were analysed using the ordinary least squares (OLS) approach, the autoregressive distributed lag (ARDL) bounds testing approach, and the ARDL error correction. Our findings from the OLS revealed that the without FDI, the saving-retention coefficient is 0.94 while it becomes 0.95 when the FDI is incorporated in the model. From the ARDL result which evidence of existence of long-run relationship was established, the conditional long-run elasticity was obtained to be 0.28 implying that a 1% increase in savings rate increases the rate of investment by 0.28%. Though this coefficient is low, it is still in line with the Feldstein-Horioka hypothesis that domestic investments are spurred by domestic savings.

The existing relationship between financial openness and economic growth is significant for a healthy analysis of country economies. In this study, it is aimed to investigate the relationship between Turkey's financial openness and economic growth by using annual data from 1985 to 2018. In the study, Turkey's data from 1985 to 2018 were used. The variables used are economic growth (GDP), financial openness (FA) and trade openness (DA). All variables are handled in terms of current ($). Here, the natural logarithm of GDP, FA and DA variables is taken and included in the model. In the study, firstly, the stationarities of the variables were determined by Carrion-i-Silvestre et al. (2009) analyzed with unit root tests. Maki (2012) cointegration test, which allows multiple structural breaks, was used after it was determined that the variables were stationary at the I(1) level. Causality analysis between variables was tested with Hacker & Hatemi (2006) bootstrap causality test. When the structural break dates are examined, it has been determined that the economic crises in 1994, 1998 and 2001 in Turkey and the global economic crises that started in 2007 and intensified in 2008 caused structural breaks by deeply affecting the Turkish economy. By determining the cointegration relationship between the variables, it was found that they would act together in the long run. In addition, a bidirectional causality relationship was found between financial openness and economic growth. In the light of these findings, it was concluded that policy makers should focus more on financial openness when they develop policies for economic growth.