Savings and Investment in India, 1970-2002: A Cointegration Approach

S Seshaiah () and S. Vuyuri

Applied Econometrics and International Development, 2005, vol. 5, issue 1

Abstract: The purpose of this paper is to investigate the relationship between savings and investment. The results reveal that there is unidirectional causality from savings to investment. From variance decomposition method, we observe that with a lag of three periods, change in savings effects 85% of variance in investment (and 92%) by the end of ten periods. On the other hand, no significant part of variance of yield curve is caused by inflation (3% and 4% at the end of three periods and ten periods, respectively). The results also showed cointegration between savings, investment and yield spread. Yield spread and investment have not been found to Granger-cause savings indicating savings are independent of investment and yield spread.

Keywords: capital mobility; yield curve; savings (search for similar items in EconPapers)
JEL-codes: E21 E22 E4 (search for similar items in EconPapers)
Date: 2005
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