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Saving, Investment and Growth: A Causality Test

Hamid Zangeneh

MPRA Paper from University Library of Munich, Germany

Abstract: All agree to the answer, i.e., they agree that accumulation of capital was, is, and will remain the most significant problem of the third world (the south) countries. The third world countries cannot accumulate capital because of low-income levels, which in turn, leads to low saving and investments. But low saving and hence low investments are responsible for low income. A catch 22 problem for the third world countries that is badly in need of solutions. This paper shows that we could conclude a one-way Granger causalities running from savings to investment, and from disposable income to investment. This is true with one or more lagged values as independent variable. This means, we need undertake policies that foster savings to spur investment, and as a result, capital accumulation.

Keywords: Granger causalities; Iranian saving and investment and economic growth (search for similar items in EconPapers)
JEL-codes: O1 E2 O16 (search for similar items in EconPapers)
Date: 2006, Revised 2006
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Published in Iranian Economic review 16.11(2006): pp. 165-175

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