DETERMINANTS OF SAVINGS IN LESOTHO

Christina Khalechane Ts'episo

Working Papers from African Economic Research Consortium

Abstract: This study examined the determinants of savings in Lesotho during the period 1982-2014. Though similar studies have been done in other countries, few have been done in Lesotho. The objectives of the study were to estimate the short-run and long-run determinants of savings in Lesotho and to propose policies to guide future decision making of government. To achieve these objectives, the study adopted the Auto Regressive Distributed Lag bounds approach in analysing the determinants of savings in Lesotho. The empirical results indicate that in the long run, Budget deficit, money supply and terms of trade were found to have a significant positive effect on national savings in Lesotho. On the other hand, deposit rate and GDP per capita income had a significant negative effect on national savings in the long run. The results for short run indicate that budget deficit, deposit rate and GDP per capita income have a positive effect on national savings. On the other hand, terms of trade was found to have a negative effect on national savings in short run. Policy implications emerging from the empirical results were that the government should expand their fiscal policy, reduce unemployment rate by proving new opportunities for employment, resort to diversification and also it should align its policies to those of South Africa since Lesotho's economy is influenced mostly by South African economy

Date: 2017-05-10
Note: African Economic Research Consortium
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