Abstract
This study examines the relationship between domestic savings and economic growth in Cote d’Ivoire during the period from 1970 to 2016. The study employs the bounds testing approach to cointegration and the Granger causality test in the examination of this relationship. The results show that in the short and long run, domestic savings is positively and significantly related to economic growth. The Granger causality results favor the conventional view that savings precede and cause economic growth. The role played by domestic savings becomes crucial in supporting the economic growth of Cote d’Ivoire. Keywords: domestic savings, economic growth, causality, causality, Cote d’Ivoire. JEL Classifications: C32, E21, O40, O55 DOI: https://doi.org/10.32479/ijefi.8781
Highlights
The relationship between savings and economic growth has caught a great deal of attention among researchers and policy makers
The result shows that the null of no cointegration between the variables is rejected in the case where GDP is taken as the dependent variable
The results indicate that there is a positive relationship between savings and economic growth in Cote d’Ivoire in both the short run and long run
Summary
The relationship between savings and economic growth has caught a great deal of attention among researchers and policy makers. The well-known growth models of Harrod (1939), Domar (1946), and Solow (1956) demonstrated that higher savings increases the domestic capital stock of the economy, which in turn leads to high economic growth rate From this view, savings precede and cause economic growth. This conventional view has led to macroeconomic policy recommendations for development in many developing countries. Another view opined that economic growth occurs before savings and results in savings (Keynes, 1936; Carroll and Wei, 1994). These two competing views have stimulated a burgeoning empirical literature. The fourth group of empirical studies failed to find any significant causal relationship between savings and growth (Mavrotas and Kelly, 2001; Baharumshah et al, 2003; Hundie, 2014; Sothan, 2014)
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