Putting the Cart before the Horse? Re-Examining the Relationship between Domestic Savings and Economic Growth in Selected Sub-Saharan African Countries

Ibrahim Osman Adam, Alhassan Musah and Muazu Ibrahim

Journal of African Business, 2017, vol. 18, issue 1, 102-123

Abstract: In addition to the standard Granger causality, this paper employs the Toda–Yamamoto approach and instantaneous causality test to examine the causal relationship between domestic savings and economic growth in 10 sub-Saharan African countries utilizing time series data. Findings from both the standard Granger causality and Toda–Yamamoto approach are consistent and robust only in five countries where domestic savings and economic growth are completely independent in three countries. For the remaining two, causality runs from savings to growth. However, for the other five countries, findings produced from both causality tests are grossly inconsistent and mixed leaving us under a quandary although the Toda–Yamamoto test is often reliable on account of its ability to avoid misleading results associated with the asymptotic nature of the standard Granger causality test. Our findings further reveal an instantaneous unidirectional causality from domestic savings to economic growth for only Benin, Mali, and South Africa suggesting that savings-led growth is rapid for these countries. We conclude based on our findings that the myriad of ‘evidence’ in earlier studies on savings-growth causality should be treated with caution given that methodological differences can produce misleading results with the potential of misdirecting policy.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://hdl.handle.net/10.1080/15228916.2016.1225472 (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:taf:wjabxx:v:18:y:2017:i:1:p:102-123

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/wjab20

DOI: 10.1080/15228916.2016.1225472

Access Statistics for this article

Journal of African Business is currently edited by Samuel Bonsu

More articles in Journal of African Business from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().