Introduction. The problem under discussion is whether savings are associated with investments in the long-term and whether savings predict investment with feedback or not. Addressing the problem is important since it informs policy formulation in the financial sector in ensuring efficient financial intermediation.
The purpose of the article is looks at the savings-investment relationship for Ghana during the period 1960 to 2016.
Methodology. Utilizing ARDL (with bounds testing) approach, the Granger predictive test, the Generalised Impulse Response Function, and Variance decomposition function.
Results. The results indicate that a 1% increase in savings, GDP and financial development would result in a 0.069%, 0.266% and 0.125% increase respectively in investment in the short-term. It is discovered that savings do not cause investment in the long-run but rather in the short-run. The Granger causality test establishes a unidirectional causality running from savings to investment in the short-run.
Discussion and Conclusion. The ramifications of the finding are that there is capital fixed status globally. Future examinations ought to consider structural break(s) issues as well as panel analysis to determine if the findings of the current study would be reproduced.
Keywords: savings, investment, long term, short-run, ARDL approach
For citation: Yeboah, S. A., & Prempeh, B. K. (2021). Econometric modelling of the savings – investments nexus for Ghana. Economic consultant, 33 (1), 40-56. doi: 10.46224/ecoc.2021.1.5
Information about the authors:
Received: Jan 24, 2021 | Accepted: Feb 24, 2021 | Published: Mar 1, 2021
Editor: Mohamed R. Abonazel, PhD in Statistics and Econometrics. Cairo University, EGYPT
Copyright: © 2021 Yeboah, S. A., & Prempeh, B. K. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Competing interests: The authors have declared that no competing interests exist.