Does Domestic Saving Matter for Economic Growth : In Case of Chinese Economy

The objective of this paper is to find the causal relationship between economic growth (GDP) rate and domestic saving growth (GDS) rate by applying the Harrod Domar growth model in the case of the Chinese economy. This paper took an analysis of Harrod Domar growth model by using the Autoregressive Distributed Lag (ARDL) model. This ARDL model was developed by Pesaran, Shin and Smith (2001) with Chinese annual data from 1964 to 2014. The ARDL bound test demonstrates that there was a long run relationship between domestic saving and economic growth. Furthermore, ARDL error correction model shows that a co-integration relationship does exist between domestic saving growth and economic growth in the Chinese economy. Therefore, there was a stable and a positive long run relationship among the domestic saving growth rate and the economic growth rate of the Chinese economy