THE CASUAL RELATIONSHIP BETWEEN GROSS DOMESTIC SAVINGS AND ECONOMIC GROWTH IN BANGLADESH

Abstract

Bangladesh has undergone a significant upswing in various macroeconomic factors over its 50-year economic journey. The purpose of this paper is to examine long run causal relationship between gross domestic savings and economic growth in the country. Annual time series data have been used as sample from the period of 1971 to 2020. Data of the Bangladeshi Gross Domestic Savings (GDS) and Gross Domestic Product(GDP) have been collected from World Bank at current dollar value. For econometric analysis we used in this study Unit Root test for checking data stationarity, Johansen Cointegration test for long run cointegration, and Granger Causality test for the long run causal relationship between GDS and GDP. In the Unit root test, Augmented Dickey-Fuller test and Phillips-Perron both tests found non-stationary at level. However, only GDP get stationary in Augmented Dickey-Fuller (ADF) test at first difference, while Phillips-Perron shows both the variables get stationary at first difference. So, unit root at second difference has been applied to make sure all the data get stationary for the test. Johansen cointegration test showed that there is a long-term cointegration between Gross Domestic Savings and GDP, but it is negatively correlated. Granger causality test showed there is a unidirectional relationship between gross domestic savings and economic growth, and the economic growth influences gross domestic savings in the economy.