Inter-relationship between Economic Growth, Savings and Inflation in Asia

Chaturvedi Vaibhav, Brajesh Kumar and Ravindra H. Dholakia

No WP2008-07-01, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: The present study examines the inter- relationship between economic growth, saving rate and inflation for south-east and south Asia in a simultaneous equation framework using two stage least squares with panel data. The relationship between saving rate and growth has been found to be bi-directional and positive. Inflation has a highly significant negative effect on growth but positive effect on saving rate. Inflation is not affected by growth but is largely determined by its past values, and saving rate is not affected by interest rate. These findings for countries in Asia with widely divergent values of aggregates are very relevant for development policies and strategies.

Date: 2008-07-01
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