Does Domestic Saving Cause Economic Growth? A Time-Series Evidence from India

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Title Does Domestic Saving Cause Economic Growth? A Time-Series Evidence from India
Author Singh, Tarlok
Journal Name Journal of Policy Modeling
Editor A.M. Costa
Year Published 2010
Place of publication United States
Publisher Elsevier
Abstract This study examines the long-run effects of domestic saving on income and tests the null of non-causality between saving and growth in India. The optimal single-equation and the maximum-likelihood system estimates of the model consistently support the predictions of the neoclassical exogenous and the post-neoclassical endogenous models of economic growth, and suggest the significant long-run effects of saving on income. The innovation accounting shows the bidirectional causality between saving and growth. The stylized evidence for the steady-state effects of saving on income suggests the need to accelerate domestic saving to finance capital accumulation and foster higher income and growth. Most of the saving comes from the surplus household sector, and the deficit private corporate and public sectors draw on household saving to meet their investment requirements and finance the resource gaps. A two-pronged approach with the incentive-based measures to induce the motivation to save and the productivity-based measures to increase income and strengthen the capacity to save, would be useful to generate higher saving and reinforce the acceleration of income and growth.
Peer Reviewed Yes
Published Yes
Alternative URI http://dx.doi.org/10.1016/j.jpolmod.2009.08.008
Volume 32
Issue Number 2
Page from 231
Page to 253
ISSN 0161-8938
Date Accessioned 2010-06-23
Language en_AU
Research Centre Griffith Asia Institute
Faculty Griffith Business School
Subject Applied Economics
URI http://hdl.handle.net/10072/33258
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1

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