Savings-Growth Nexus in Ghana: Cointegration and Causal Relationship Analyses - Theoretical Economics Letters

TEL > Vol.7 No.2, February 2017

Theoretical Economics Letters

Volume 7, Issue 2 (February 2017)

ISSN Print: 2162-2078 ISSN Online: 2162-2086

Google-based Impact Factor: 1.19 Citations h5-index & Ranking

Savings-Growth Nexus in Ghana: Cointegration and Causal Relationship Analyses ()

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DOI: 10.4236/tel.2017.72012 1,756 Downloads 3,098 Views Citations

Author(s)

Robert Becker Pickson¹, Koduah Dawud Enning², Anthony Siaw¹

Affiliation(s)

¹College of Economics and Management, Sichuan Agricultural University, Chengdu, China.
²Research, Monitoring and Evaluation Department, Ghana Cocoa Board, Accra, Ghana.

ABSTRACT

The wide range of controversies surrounding the direction of causality between savings and economic growth necessitated this study. The study was intended to investigate the relationship between gross domestic savings and economic growth in Ghana; with the specific objective of finding whether there exists a long run relationship between them, and it was also intended to ascertain the direction of causality between the two running actors in the study over the period of 1972 to 2013. The study employed Johansen cointegration test to reveal no long run relationship between gross domestic savings and economic growth in Ghana. This necessitated the usage of the VAR technique to estimate the short run relationships. The finding was that there exists a unidirectional line of causation running from gross domestic savings to economic growth in Ghana. It is strongly recommended therefore that the Bank of Ghana will use the monetary policy instruments to influence and advise the commercial banks on the need to peg the deposit rate relatively higher at least equal or little above the existing interest rate. This is because the deposit rate is the opportunity cost of money demand for other purposes.

KEYWORDS

Gross Domestic Savings, Economic Growth, Ghana

Share and Cite:

Pickson, R. , Enning, K. and Siaw, A. (2017) Savings-Growth Nexus in Ghana: Cointegration and Causal Relationship Analyses. Theoretical Economics Letters, 7, 139-153. doi: 10.4236/tel.2017.72012.

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