The impact of demography, growth and public policy on household saving: a case study of Pakistan

Mohsin Ahmad, Zeshan Atiq, Shaista Alam and Muhammad S. Butt
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Zeshan Atiq: University of Karachi, Pakistan
Muhammad S. Butt: University of Karachi, Pakistan

Asia-Pacific Development Journal, 2006, vol. 13, issue 2, 57-71

Abstract: The present study investigates the behaviour of household saving by employing the Johansen-Juselius cointegration technique and error correction model to determine the long run and short run dynamics of the system respectively using “time-series” data for Pakistan over the period 1972-2003. The study found the existence of one cointegrating vector, indicating a valid long run economic relationship among the determinants of household saving. The study established that there exists a valid long run inverse relationship between household saving and demographic variables. The results also reveal that income and growth variables have a significant positive effect on household saving. Similarly, the positive impact of real interest rates on saving indicates that the substitution effect dominates the income effect in Pakistan. The study also found that the rate of inflation affects household saving rate negatively. Furthermore, public saving ‘crowds-out’ private saving less proportionately in Pakistan, than in other comparable cases.

Date: 2006
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