Re-examining the saving-investment nexus: threshold cointegration and causality evidence from the ECOWAS

Jacques Esso ()

Economic Change and Restructuring, 2012, vol. 45, issue 3, 193-220

Abstract: The aim of this paper is to re-examine the relationship between saving and investment in the case of ECOWAS countries. We then employ the Gregory and Hansen (J Econometr 70:99–126, 1996a ; Oxford Bull Econ Stat 58:555–560, 1996b ) threshold cointegration tests and the Toda and Yamamoto (J Econometr 66:225–250, 1995 ) causality procedure. Threshold cointegration approach allows estimating changes in the saving-retention coefficients over time. Using yearly data for the period from 1960 to 2007, we show out two groups of countries regarding the cointegration test results. In the first group (The Gambia and Togo), capital is perfectly mobile since there is no long-run relationship between savings and investment. The second group comprised of the ten other ECOWAS countries studied, is characterized by an incomplete capital mobility. Moreover, in the second group the saving-retention coefficient is time-varying in most of the ECOWAS countries (except for Benin and Niger) and is different from a country to another one. The changes in the saving-retention coefficients indicate how international capital mobility has changed. Moreover, the inclusion of trade openness and country size in the saving-investment equation reduces the saving retention coefficients implying improvement of capital mobility over time. Furthermore, investment rates cause saving rates in Benin, Guinea-Bissau and Niger while saving rates cause investment rates in Cote d’Ivoire, Nigeria and Sierra Leone. Copyright Springer Science+Business Media, LLC. 2012

Keywords: Investment; Saving; Unit root; Threshold cointegration; Causality; ECOWAS; C32; E21 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10644-011-9115-y (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ecopln:v:45:y:2012:i:3:p:193-220

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/10644/PS2

DOI: 10.1007/s10644-011-9115-y

Access Statistics for this article

Economic Change and Restructuring is currently edited by George Hondroyiannis

More articles in Economic Change and Restructuring from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().