Saving Growth Nexus in Pakistan : Innovation Accounting Technique

The paper investigated the relationship between economic growth and domestic savings by employing the technique for causal relationship between them. In the model ARDL Bounds Testing, Johanson Cointegration Approach for long-run association, Innovation Accounting Techniques along with Toda and Yamamoto (1995) for causal relationship has been applied on annual time series data from 1971 to 2997. Ng-Perron De-trended Test is used for order of integration of running actors. Results revealed that there exists a long-run relationship between economic growth and domestic savings and tier association is robust at least in long span of time. Causal results through innovation accounting technique assert that there is one-way causality running from economic growth to domestic savings while very weak from opposite side. Results by Toda and Yamamoto’s technique also confirm that economic growth leads domestic savings in Pakistan