POLICY IMPLICATIONS FOR PROMOTING SAVINGS AND INVESTMENT IN PAKISTAN: LESSONS FROM EMPIRICAL ANALYSIS
Abstract
This study investigates the determinants of savings in Pakistan, a developing nation with a weak financial market. Savings play a crucial role in economic growth and development, particularly in nations with limited access to external financing. The national savings shortfall is a significant constraint on economic progress in many developing countries. National savings are expected to stimulate investments, which, in turn, form the basis for rapid economic development. Therefore, understanding the factors that influence savings is of great importance.
Although there have been some recent research works on savings in developing nations, many of them have been criticized for their econometric shortcomings. This study addresses these limitations by employing the autoregressive distributed lag (ARDL) approach to cointegration analysis, which allows for the examination of both long-run and short-run associations. By utilizing time series data from 1973 to 2014, this study aims to provide a comprehensive analysis of the determinants of savings in Pakistan.
The key variables examined in this study include the saving rate, real rate of interest, growth of per capita income, deficits of current account (DCA), and the ratio of dependency. The empirical analysis utilizes the ARDL framework to explore the short-run and long-run relationships among these variables. The findings of this study contribute to the existing literature by offering insights into the specific determinants of savings in Pakistan.
The implications of the empirical results are discussed in the context of policy and strategy formulation. By identifying the factors that influence savings, policymakers can design interventions to promote higher savings rates, which, in turn, can facilitate investment and economic growth. This study highlights the significance of savings in the economic development of Pakistan and provides valuable insights for policymakers and researchers interested in understanding the dynamics of savings in developing nations
